7 Factors that Impact Your Insurance Costs

Insurance is a product that has little to do with serving customers.  By design, insurance companies use complex and refined mathematical formulas to calculate the anticipated incidents and values pertaining to losses they will have to cover. They then set the price of the insurance based on the expected losses, adding in their required profit margin. 

Not all insurance is created equal.  Depending on the statistical make up of the group participants, the rates set by individual insurance companies can vary dramatically from company to company.  This is why shopping for insurance should never include just individual carriers.  We recommend using insurance brokers that can quote multiple lines across many insurance companies.  Make sure that the carrier providing the policy has a favorable financial stability rating with A.M. Best Insurance Rating Organization at the following link  http://www.ambest.com/home/default.aspx

Below is a brief explanation of each rating:

  • Aaa (Exceptional)
  • Aa (Very Strong)
  • A (Strong)
  • Bbb (Adequate)
  • Bb (fair)
  • B (Marginal)
  • C (Poor)
  • D (In Default)

Factors impacting the rate quoted/charged for your policy:

  • Your claim history
  • Your credit score
  • Your profession
  • Where you live
  • Amount of deductible
  • Association affiliations
  • Bundle – some companies offer discounts for including both home and auto on same policy
  • The features of what is being insured
    • Home:
      • Features- Fireplace
      • Cost to replace
      • Asphalt shingle roof vs. metal roof vs. clay tile roof
      • Vinyl siding vs. brick
      • Finishing’s such as flooring
      • Dogs of certain breeds drive up the cost of liability insurance
    • Auto:
      • Gender and age
      • Marital status
      • Vehicle size
      • Age of vehicle
      • Cost to repair automobile
      • Safety features
      • Theft deterrent features of automobile
      • Likelihood of theft
      • Driving history
      • Driving habits
        • Distance to work
        • Where and when you drive

Health insurance – this definitely is a product where it pays to be a participant in a large and diverse group.  As an example, if you’re in a group with all elderly participants, your rates will be exponentially higher than if you are in a group dominated by young participants.  I have family and friends that live in sparsely populated states and their health insurance rates are very high.  We live in a state that is well populated and we have comparably low insurance rates due to the diverse nature of the participant groups.  Age and pre-existing conditions are huge factors in how much you pay for health insurance.  If you are reliant on the Affordable Care Act for your insurance coverage, your income can play a very large part in how much your premiums and associated subsidies are.  There are alternative products that may worth exploring such as faith-based cooperatives, for special circumstances. 

Life Insurance- Only individuals whom others rely on for income are typically the strongest candidates for carrying Life Insurance.  Term Life Insurance provides coverage for a fixed period of time, and at predetermined cost.  Discounts are offered as part of employer benefits and association affiliation.   Those who do not have others depending on them for income can typically forgo carrying life insurance.  Life insurance should not be considered an investment tool.  

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