Life has risks. You might have a car accident or your home could be damaged in a storm. Manage those risks by purchasing insurance. To make sure you have the coverage that works for you – and you are paying a fair price for the coverage you have – it’s helpful to get familiar with different policies and factors that affect their pricing.

Insurance 101

Most people see insurance as a safety net that will protect them from life’s unfortunate events. However, an insurance policy is much more specific than that. Each policy requires the insurance company to assume liability when a specific type of event occurs. For some needs like protecting your belongings if you’re a renter, the cost is relatively inexpensive, particularly when you consider the value of your belongings that would be covered under a renters insurance policy. To make sure you’re properly protected, it’s important to understand what a policy covers.

 Tip 

The higher the deductible, the lower the premium.

Knowing what you need

Insurance needs vary greatly based on how much you own, the size and value of your household, and how likely it is that you’ll need to make a claim. For instance, a college student who lives in a rented apartment, rides public transportation and has very few assets may just need limited coverage – such as renters insurance and basic health insurance. However, a homeowner with two cars and a family may need more comprehensive coverage – such as homeowners, auto, life, umbrella , and health insurance.

Understanding your premiums

The price of your insurance premiums – which is the amount you pay regularly for insurance coverage – depends in part on the amount of your deductible – which is the amount you pay before your insurance coverage pays anything. As a general rule, the higher the deductible, the lower the premium. Here are some major risk factors that could affect your premiums for a few common types of insurance:

  • Auto insurance: Where you live, the vehicle you drive, your age, how far you drive to and from work, and your driving record. Speeding tickets and accidents will increase your premiums.
  • Homeowners insurance: Your home’s location, the cost of rebuilding it (not the appraised value), safety and security features, and the value of your belongings. The age of your roof and plumbing, alarm systems, and how far you live from a fire department can affect your premiums.
  • Life insurance: Your family’s health history and longevity, your lifestyle, and your health habits. Whether you smoke, exercise, or maintain a healthy body weight can significantly impact your premiums.

With this information in hand, talk to your insurance agent about the factors that affect your policy rates. You may be surprised to find that making a few simple changes could significantly impact your rates.

Q:
Which of these items will not impact your premium?

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