There is a lot of terminology surrounding insurance and one of the most commonly used terms is insurance premium. But what does…
There is a lot of terminology surrounding insurance and one of the most commonly used terms is insurance premium. But what does it mean and how will it affect you? We will help you understood what insurance premiums are and how they impact on you.
Defining Insurance Premium
Insurance premium is the regular payments you make to your insurer so you retain cover on your insurance policy if you need to make a claim. The premium covers what is outlined in the insurance policy when you signed up and the inclusions and exclusion will vary depending on the policy.
The amount of your insurance premium is determined by the insurer who calculates the risk of the insurance policy. The more likely the event you have insured for is, the higher your premium. For example, statistically it has been shown that younger men are more likely to be involved in car accidents. For this reason, premiums for young men who take out car insurance will be higher than for another age group. Another example would be your premiums for your home insurance may be lower if you have an alarm system as the risk of burglary is reduced. Premiums are paid in installments, generally monthly or annually.
How to Reduce Insurance Premium
Insurance premium can be influenced by your own circumstances and also by things out of your control, such as natural disasters. However, there are ways that you can reduce your premium.
One way to reduce your premium is to increase your excess as generally the larger the excess, the lower the premium. You could also take steps to reduce your risk, such as getting an alarm system on your home. It’s also wise to ensure that you’re not over-insured. Check that you have an accurate estimate on how much your home, contents and vehicles are worth rather than guessing as people tend to overestimate. One of the most effective ways to make sure you are getting the most affordable premium is to shop around and get quotes from a number of insurers to make sure you’re getting the best deal, or use an insurance to help you.
However, it’s important to remember that if you take measures you scale back your insurance policy so your payments are reduced, you may pay for it in other ways. For example, you may have to pay a higher excess if something goes wrong which may be difficult to afford and there will generally be more limits on what you can claim. It’s important that you don’t compromise your coverage for a cheaper deal as this may turn out to be more expensive in the long run if you need to make a claim. You will need to weigh up by ensuring you have an affordable premium while also being properly covered. If you’re unsure about this, it’s best to speak with your insurance broker.
For any further questions or to discuss your specific insurance needs, contact Elliott Insurance Brokers on 1300 635 315 today and we would be more than happy to assist.
