Insurance Premium
What Is an Insurance Premium?
An insurance premium is the cost of your insurance policy. It’s the dollar amount you pay to have insurance.
How Does an Insurance Premium Work?
You pay premiums for insurance on a regular, recurring basis, like your water and other utility bills. Also like a utility bill, if you don’t pay your premium the insurance company can cancel your coverage completely.
What Affects the Cost of My Insurance Premium?
The cost of your liability insurance premium depends on several factors. For example, bigger businesses and higher coverage limits usually mean higher premiums. Other influential factors include:
- Location
- Coverage types
- Deductibles
- Past claims
- Gross annual income
- Products manufactured or sold
Examples of how these things may influence your rates:
- Your location can increase your premiums if there are more natural disasters, higher crime rates, or additional regulations around your type of business in that area
- When you have multiple coverage types, your rates will generally be higher because of the increased amount of insurance
- Prior claims are indicators of risk patterns. No prior claims suggest you manage risks well, which may lower your rates. Multiple past claims suggest the opposite, which may increase your rates
All in all, the most significant influence on your premium is your risk.
More risk = higher premiums
Less risk = lower premiums
Why Do Premiums Vary Between Businesses?
Essentially, premiums vary between business types because different businesses have different levels of risk.
High-risk industries have higher liability insurance premiums because the chances of those businesses experiencing a claim are typically higher. High-risk industries include things like:
- Construction and manufacturing, due to the higher rate of accidents and injuries
- Cannabis and other supplement retailers, due to extensive government regulations around those items
- Large and/or complex businesses, because there are simply more things happening on a day-to-day basis
Premium vs Deductible: What’s the Difference?
Your premium is what you pay to maintain your insurance policy.
A deductible is what you have to pay on a claim before your insurance kicks in.
Insurance premium: Your “subscription” cost to have and keep an insurance policy.
Insurance deductible: Your portion of a claim, only occurs with claims.
Typically, the higher your deductible is, the lower your premium costs are. And the lower your deductible, the higher your premium.
$ Deductible → $$$ Premium
$$$ Deductible → $ Premium
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