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Many people make the mistake of assuming insurance premiums are arrived at through a simple formula. Because of this, they believe insurance premiums are set in stone. In fact, insurance premiums are not the result of a simple mathematical algorithm. They are very subjective and complicated, and they can respond to changes in your personal plan or in the economy.
Insurance Premiums Can Be Manipulated
Whether you are buying car insurance, health insurance or home insurance, your premiums can be manipulated by your personal election choices. The two factors that most affect your premium are your deductible and your limits. You can raise your deductible, the amount you agree to pay on each claim or on the entire policy before insurance kicks in, to lower your premium. You should only raise your deductible to an amount you know you could cover on a claim or on a policy. This means you will need to understand your budget in order to adjust the deductible correctly. The same goes for insurance limits, or the total amount a claim would pay out. If you can cover a portion of the claim you can lower the limits and save money.
Insurance Premiums Can Cost More Than Going Uninsured
If you are not smart about adjusting your premiums, you may not be saving money at all through your insurance. Going for years and years without a claim on a low deductible plan is a waste of money. Paying even one claim out of pocket in those several years would have amounted to less cost than insuring yourself for the same amount of time. Instead of unnecessarily paying out, you can aim for catastrophe only coverage. This works better for home or car insurance, where the incidence of claim is relatively low. The average person makes medical claims frequently, even for routine visits, and should maintain good health insurance coverage.
Insurance Premiums Respond to Financial Markets
Your premiums rely on more than just your personal situation. As the financial markets go up and down, insurance companies make and lose money. They are invested in the markets. They also need to sell insurance in order to continue to be profitable. As a result of a large financial loss, insurance premiums can go up for an average consumer. This is particularly true in a recession, when the number of people missing payments is high. An insurance company will need to compensate for these losses by collecting more money from those who are still making payments.
You Pay for Corporate Insurance
It is easy to think your company pays for insurance supplied as part of your benefits package. Looking at your paycheck, you will realize immediately this is not true. In fact, you pay an average of 50% of your medical premiums each month. The amount you pay will be itemized on each paycheck, and it usually is in the hundreds of dollars per month. While your company covers a portion of the cost, you are still footing a large part of the bill.
