Insurance premiums can be calculated in a variety of ways depending on the type of insurance policy. However, most insurance providers look at a few common variables when calculating the premium for a policy.
The risk associated with the insured: Most insurance policies are calculated based on the risk associated with the insured. This means that the greater the risk, the higher the premium will be. For example, younger drivers are considered to have a greater risk, so their premiums will be higher than an older driver.
The sum insured: The sum insured is the amount of money that the insurance policy is covering. Generally, the higher the sum insured the higher the premium will be.
The duration of the policy: The longer the period of time the policy covers, the higher the premium will be.
Age & Gender: Insurance providers often use age and gender as risk factors when calculating the premium. Generally, younger drivers are considered to have higher risk which leads to higher premiums, whereas an older driver will have a lower risk and therefore a lower premium.
Claims history & Driving record: An individual’s claims history and driving record can also be taken into account when calculating a premium. Generally, those with a good driving record and no claims will pay lower premiums than those with multiple claims or a history of traffic violations.
Instant discounts: There are some insurance providers that offer discounts for particular activities such as installing an alarm system or taking a driver’s education class.
These are the general factors that insurance providers consider for calculating insurance premiums. However, each insurer may have its own method for calculating the premium which could include additional factors. It is best to consult with your insurance provider to understand how your insurance premium is calculated.
For more information on how insurance premiums are calculated, you may find this article by Investopedia useful: https://www.investopedia.com/articles/pf/05/insurancepremiums.asp