When calculating premiums, there is an increase in the price for each risk factor identified. An amount that is added to the basic premium due to risk is called a loading. Examples of loadings include:
KNOW? In 2012,
Did You
• People over the age of 34 pay more than people under that age when they take out health insurance for the first time.
• People who live in a city pay more for home insurance.
there was an EU ruling that gender cannot be used to rate risk in insurance.
• Drivers with a provisional licence pay more for car insurance than drivers with a full licence.
• People who drive expensive cars pay more for car insurance. • People who work in dangerous jobs (e.g. firefighters) pay more for life assurance. • People with existing health problems pay more for travel insurance.
Discounts and No Claims Bonuses
Insurance companies offer special discounts when risks are lowered. For example, a company might offer a 3% discount if a car is fitted with a burglar alarm.
If a driver does not have any accidents during the period their car insurance policy covers, they are rewarded with a discount when they renew the policy. This is called a no claims bonus.
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A no claims bonus is a discount received for not making a claim on car insurance. This is deducted from the premium cost.
Reducing Risk
In order to lower premium payments, a person seeking insurance should reduce risk where possible. To lower life assurance and health insurance premiums:
• Exercise regularly and eat a healthy diet. • Do not smoke. To lower car insurance premiums:
• Drive carefully and always wear a seatbelt. • Install a car alarm or immobiliser. To lower home insurance premiums:
• Install a house alarm. • Install smoke alarms in the home.
