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What is an Insurance Premium?

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When it comes to insurance one of the most important things to consider is the insurance premium. This is the amount of money that you need to keep paying if you want to ensure that the policy stays active. If you fail to pay the insurance premium then this will usually mean that the insurance is not valid. There are plenty of examples of people who were late paying their life insurance premium and died before they could get around to it; this means that there family were left with nothing.

How is the Price of an Insurance Premium Decided?

There are many factors that will determine the price of an insurance premium and a lot will depend on the type of policy you are considering. For example, if you want car insurance they will take into account things like the type of car, your history as a driver, your sex (females are less likely to make a claim), your age, and any driving convictions you might have. If you are looking for health insurance then your age, current health, and lifestyle will be part of the factors that determine the final insurance premium you have to pay.

It is important to compare the quotes between different insurance companies because they can vary a great deal. This is because although insurance companies tend to use the same factors when determining risks they will interpret this data differently. Of course it is also the case that there is a lot of competition so some insurance companies will work hard to offer the lowest possible premiums. There are other companies that feel confident about charging higher premiums because they have a quality reputation.

Paying an Insurance Premium

When it comes to actually paying the insurance premium there are a number of ways that you may be expected to do this. Some policies involve you paying money every month, while others can be every year. Alternatively you could be expected to pay in installments over the course of the insurance; for example if your car insurance is $1000 for the year you might have to pay installments of $300/$400/$300.

It is important that you not only consider the cost of your insurance premium but also the way you are going to repay it. If you choose the monthly repayment schedule then it could be that you will be paying more overall for the policy. This is because it is common for there to be a fee for choosing monthly payments; this could be anything up to $20 a month. This would mean that a policy that normally cost $1000 could end up costing you $1240 if you choose the monthly option.

In conclusion then, an insurance premium is the amount you need to pay to keep a policy active. When choosing any type of insurance always compare the cost of this with other options. It is also recommended that you consider how the method of repayment is going to affect the final price you pay.

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Meet the Author

Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

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