What is Insurance and Insurance premium? Insurance is a risk transfer mechanism. It’s a method of shifting the responsibility for losses to the party who is a specialist for handling the risk by spreading it over a large number of people or firms
Insurance is a means of protection from financial loss. It’s a form of risk management primarily used against the risk of uncertain loss. Insurance is a system of protection against loss in which a number of individuals agree to pay certain sums of money, called premiums, to create a pool of money which will use the contribution of these individuals to pay the losses of the few caused by events such as fire, accidents, illness or death.
Idea of Insurance
In previous centuries, the bottomry contract was used by money lenders to shift the risk from owners of ships to cargoes to themselves. If the ship or cargo was lost during the voyage . The contractor pays the losses and If the voyage was successful then the bottomry loan contractor keeps it was high because it includes the amount of interest and risk. This bottomry loan sowed the seed of the insurance idea.
What Is the Insurance Premium?
The insurance premium is defined as the amount of money that the insurance company is going to charge you for an insurance policy you are getting. The insurance premium is the installments or cost of your insurance.
Insurance premiums calculation usually based on your personal information, location and other company determined information
The insurance premium is sometimes paid on a yearly basis, semi-annual basis, or, many companies today allow, monthly financing of the premium.
What Factors Determine the Premium?
There are three basic factors which determine the premium
The more coverage you get, the more comprehensive package you choose, the higher your insurance premiums will be.
Your insurance history like your background history with insurance companies, personal factors like, car accident frequency or personal claims history, etc..
Competition in the Insurance Industry and Target Area
The competition in Insurance sector also a major factor to determine the insurance premium. The targeted area where the competition and standard of life exist.