Whether it is insuring your home, your car or yourself against death, injury or illness, one of the most common barriers to taking out sufficient cover is the cost of premiums. But what causes some people’s insurance to cost more than others, and some types of insurance to be more costly than others? For this week’s article we’re going to concentrate on personal risk cover and the different reasons why your premiums can alter.
All Insurance premiums are calculated on a statistical analysis of how likely it is that a claim payment will need to be made. That is why some professions and dangerous pastimes are harder to insure against than others. Insurers experience or previous pay-out histories can have a marked effect on how they price the policy or in fact if they will offer any cover at all. For many people, previous medical conditions will lead to the exclusion of cover for a specific event, due to the increased likelihood of similar accidents or illnesses. There are however, some occasions when rather than excluding cover, the insurers will load a premium, increasing the cost by a percentage of the standard premium, to cover the perceived risk.
There are of course other factors that will make a difference to premium pricing that aren’t related to previous medical records. As much as we hate to think about it, the older we get, the more likely we are to suffer from an illness, injury or critical event that will lead to a claim. Consequently, the cost of premiums increase as you get older, and while it may seem strange to consider taking out insurances while young, bullet-proof and indestructible, the cost of insurance premiums for those taking out cover in their 40’s and 50’s is considerably more expensive than those in the same age bracket who took out their cover while in their 20’s.
Lifestyle choices will also have an impact. Those who smoke can expect to pay almost double the premium of non-smokers for their personal insurances, as can those who drink more than the ministry of health accepted guidelines of 21 alcohol units for women and 28 for men. However, some of the largest loadings are reserved for those who are classified seriously overweight. Obesity has been highlighted as one of the main reasons for early death or serious illness in New Zealand, overtaking smoking related illnesses as the biggest killer.
There are also differences which vary dependent on the type of cover being taken out. For example a man and women of the same age, non-smokers, with the same body type will have differing premium costs due to the likeliness of claim. The man’s life cover will be more expensive due to their shorter life expectancy, whereas trauma and income protection cover is more expensive for females for the simple reason that they are more likely to discover something wrong and get treatment which will mean a claim payment.
There are some things that we can’t change, but when it comes to controlling insurance premium pricing, the sooner cover is taken out and the healthier the lifestyle choices are made, the better chance you’ll have to save money on your insurances in your many years ahead.
