Factors That Impacts Premiums

1. What is an Insurance Premium?

To answer the question "What is an insurance premium?" it is first necessary to understand the concept behind insurance itself. There was a time in the history of this country when an accident, injury or other crisis could result in the loss of property or health due to an inability of those involved to compensate for the damage. The idea of insurance - whether life, health, car, homeowners or other type of policy - is based on the need to "hedge" or protect against losses or costs that are more than what you would be able to pay on your own.

For instance, a car insurance premium will pay to have your car repaired in the event of an accident. Because cars are typically a costly item (second only to the purchase of a home) the loss of a car due to accident could create a major hardship without adequate insurance. You could be responsible for the remaining debt on the automobile as well as the need to replace or repair the vehicle itself. Additionally, damage to property or injuries sustained would need to be compensated for; all of this is typically a part of an automotive premium.

 At the most basic level, insurance premiums are the cost of providing coverage charged by the insurance company in order to compensate in the case of an accident, injury or other loss. Because insurance companies are in the business of making money (for profit), special attention is given to the likelihood of having to pay a claim. The greater the likelihood (or risk) then the higher the insurance premium or cost required to obtain coverage.

Make a point of learning how to read your insurance rate quotes to understand what you are paying for each type of coverage. Not only will it help reduce the cost of insurance premiums by helping to avoid errors and mistakes but knowing what you pay for each item allows you to make informed decisions about your lifestyle, purchasing habits and other factors that impact premiums. Always ask for a complete explanation for any item you do not fully understand - your insurance agent will be happy to assist.

2. Title Insurance Premium Tips

Whenever buying or selling real estate, chances are that you will quickly encounter a title insurance premium charge while reviewing the closing costs related to the sale of property. Title insurance is a type of insurance designed to protect against loss related to the title of the property.

Common examples of potential title problems include a "clouded title" where ownership wasn't properly recorded, technical problems related to simple clerical or paper-work errors, or even liens and back taxes assessed against the property. Before issuing a title policy, a title company conducts a comprehensive search designed to reduce the risk of problems. However, even with a full search, errors are still found on a significant number of property transfers at a later date.

Title insurance is required by the mortgage lender if you intend to finance the property however, that only protects the banks interest in the property. To make sure your interests are equally protected, obtain quotes for an owners title policy. Although both are title policies, the coverage and protection is very different so pay attention to what you are purchasing.

When shopping for the best title insurance premiums, be sure to compare the costs of coverage. It is possible to save hundreds of dollars with a few simple phone calls. Don't assume the title company suggested by your agent or broker is the most cost effective - instead, take the time to obtain quotes before making a final decision on who to select.

3. What is an Insurance Premium Audit?

If you purchase commercial insurance policies for car, general liability, workers compensation or other common coverage types then the original rate is actually an estimate or "deposit premium" based upon the anticipated level of risk associated with providing coverage. Once the original policy comes up for renewal, the insurance company conducts an insurance premium audit to calculate the actual operational exposure and risk associated with the policy in order to adjust the quoted renewal rates.

The cost of insurance is a major consideration for most small business owners so the thought of not knowing exactly what to expect when it comes to an insurance premium audit can be frustrating but with a little planning and preparation, you might just save money instead. Use this helpful checklist to make sure you are ready for an insurance premium audit.

1. Obtain copies of all pertinent records and documentation.

2. Make anticipated changes to the policy in advance.

3. Keep copies of certificates of insurance and other coverage on hand.

4. Never allow the policy to lapse.

5. Plan a convenient time for the audit then make sure you keep the appointment.

6. Request a copy of the audit statement for review. Verify all information is correct and put any modifications in writing.

7. Carefully review the policy.