5 Top Reasons Why You Pay More For Your Insurance Plan

We get it – not getting insurance is one of the biggest financial mistakes one can make, whether it’s for health, home, auto, or business. But have you ever thought why some insurance plans are higher-priced than others?

Let’s assume that insurance plans are similar to loans, where lenders are threatened by borrowers with bad credit history, anticipating great possibilities they won’t be able to repay. While lending companies still approve their loan, they give high-risk borrowers higher interest rates and more expensive loan options. Relatively, insurance companies assess their clients’ age, lifestyle, and medical background and look at the risks they’re likely to face in the long run.

Actuaries assess and manage risks for financial investments and insurance policies. These professionals use math, financial theories, and statistics to forecast how likely their clients are to file a claim. The higher you’re likely to file, the higher your risks are, and the more they can validate charging you higher insurance premiums.
There are certain factors that comprise your risk profile, so expect to pay more if:

You have (or are likely to have) health issues

  • To determine health coverage risks, here are some of the questions to ponder:
  • How old are you?
  • How often do you consume tobacco and/or alcohol?
  • Do you work in a toxic, injury-prone environment?
  • Are you overweight?
  • Does your family have a history of certain medical conditions or ailments?
  • Have you been diagnosed with a serious illness in the past?
  • Or, are you currently battling with an illness which requires medicine maintenance and hospitalization?

Age, weight, vices, work environment, and illnesses are factors considered. Upon completion of the underwriting process, the insurer uses a rating table to match the amount of assumed risk with the premium required for the coverage. So it’s safe to say that physically fit clients with cleaner, healthier lifestyles and working environments tend to be approved of cheaper insurance plans than clients with the tendency of getting ill.

health insurance advice

High-risk clients aren’t immediately denied yet they’re offered more coverage, which means higher premiums. However, skimping on health insurance and opting for low-premium plans may do more harm than good in the event you actually face a serious illness or injury. Cheaper plans are less likely to cover maintenance medications and frequent doctor visits and your savings may be wiped out by your out-of-pocket costs.

The more you pay, the more coverage you get and the less you’ll need to dig out from your pockets. Try to assess the total cost of care including your medications and must-have medical specialists before choosing a plan that meets all your needs without requiring you to cover hefty deductibles. Ensure the plan covers your medications and includes your must-have medical specialists.

Your history of claims are hefty

insurance claims
Home insurance and auto insurance plans are best examples. If you’re currently insured and you’ve made a lot of claims, insurers assume you’ll file another claim and thus, increase your premiums. Your rates may go up based on your history of claims, even if you weren’t at fault for the damages. Statistically speaking, you still pose a higher risk.

You may be thinking, “will rates automatically go up if I make a claim?” Well, it depends on who or what is at fault. For example, the rates for homeowner policies won’t automatically increase after a single claim. However, two claims within three years probably will trigger the increase. Most companies may also not raise rates if the claims are results of severe natural calamities.

You have a poor credit file

Lending companies aren’t the sole organizations concerned about your credit score. Insurance companies also evaluate your credit history to estimate your level of risk. Insurers, however, look at credit scores for a different reason.

Car insurance brokers, for instance, have determined that people with lower credit scores are more likely to get into accidents than individual with higher scores. For that matter, they charge more – another valid reason to look closely at your credit score and strive to improve it.

You have a shady driving record

shady driving record
While it’s a no-brainer why driving records affect the rates of your car insurance premiums, it’s interesting to know that those driving violations can also affect your life and health insurance.
The more driving violations you have (including speeding, reckless driving, and driving under the influence), the higher you’re prone to auto fatalities, which means insurance companies have a greater chance of paying out. There are instances when serious violations, like driving while intoxicated, won’t even allow you to get approved for any coverage.

You live in a high-cost location

If you move to a different location, you may see your insurance premiums boost even when you have a clean driving record and healthy physiological state. Insurance rates, like in the U.S., can increase depending on zip code, the cost of medical care in the area, and population health factors.


One way to lower your insurance premium rates is to accept more financial responsibility and increase your deductibles, or the sum of money you pay out of the pocket before the insurance company pays for the rest. By lowering their loss reimbursement cost, insurance companies could charge less for the coverage.

Author Bio:

Carmina Natividad is one of the enthusiastic writers for Insurance Adviser, one of the largest and most credible General Insurance businesses in Australia and New Zealand, providing high quality risk management advice for business owners.

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