How Are Insurance Premiums Determined?

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Insurance premiums are based on a great variety of factors, each of which plays a part in determining the amount that you will pay for coverage.  Commercial and surplus lines policies are based on the risk itself with little or no inclusion of personal data such as insurance score.  Regarding the property (or risk) itself, some factors such as the age of the structure, construction type, occupancy, geographic location, and maintenance condition all play a part.  With most ‘personal’ lines of insurance such as dwelling policies, homeowner’s policies, and so on, insurance companies often consider the applicant’s past claim history (5 years) and FICO score (for risk evaluation).  In addition, there many discounts, credits, and surcharges which may also be figured in depending upon the company and type of insurance being applied for.  Some of these include alarm discounts, age of applicant (over 50) discount, multi-policy discount, property updating discount, and many more.  In short, there is no ‘cut and dry’ method of determining premium and each quote is based on its own merits.

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