- Insurance premiums are calculated according to the risks that insurers see in each policy.
- By reducing the potential risk, policyholders can reduce the cost of insurance premiums too.
- You can take special measures to improve your wellbeing and safely tackle Life, Health, Auto and other specific insurance types.
- Other good ways to save on your premium are to request many offers and compare, to bundle insurance purchases and to increase your deductibles.
Whether it’s your car, your home, your health or even your holiday – almost everything that has a potential of risk can be insured these days. No doubt, protecting your life by financial covers is a wise move, but sometimes the price you pay for an insurance premium may not match your budget. In such cases, it may do well to try and lower your insurance premiums. We have laid out a few straightforward methods here. Before you do that, it’s useful to know what exactly is an insurance premium and how is it calculated.
What is an ‘Insurance Premium’?
The amount of money that an insured person (or business) pays to an insurance company to take over a specific risk is what we call an ‘insurance premium.’ In the UAE this premium is usually paid upfront for a year.
How are premiums calculated?
Insurers calculate the premium based on the risk involved with a policy. There are various factors that determine such a risk. For example, insurance for a car driven by a young driver that owns a single vehicle will be much higher than that with an experienced driver that holds several vehicles. For life and health insurances, the overall wellbeing and lifestyle habits are essential in deciding the cost of premiums.
Here are a few factors that insurers will look at when deciding the cost:
- What are the risks, how likely are they to materialize and what is the financial impact for each risk if it does become reality?
- What is the amount of the deductible?
- What are the limits for the coverage of different types of risks?
- Does the applicant live a risky lifestyle compared to the average person?
Recognizing these factors is key in helping you figure out ways to lower your insurance premiums. Here are a few easy tips you can follow:
Look before you lock-in
As with any purchase, it is best to shop around before you buy. Since the insurance industry is very competitive, you are bound to get various bids with a quick online search and eventually some advice on the phone. Ensure to get at least three quotes and compare the benefits and limits. A new online insurance trend is thriving in Dubai and insurance experts sites such as Aqeed.com can get you the best rates fast and easy.
Package many into one
Most insurance companies are ready to provide cover for your home, car, life and more. By combining all your insurances from one insurer or insurance advisor, you are likely to get a higher discount. Additionally, this may also streamline your service experience as you won’t have to compile repeatedly and submit your details.
Increase your deductible
A deductible is the amount you pay yourself when you make a claim. For example, if you claim a medical bill of AED 2,000 and the insurer pays AED 1,700, then the remaining amount paid by you (AED 300) is the deductible. Increasing the deductible reduces the expenses of the insurer and in turn can lower your premiums.
Lower Your Insured Limits
With most insured risks, there is a limit for the total financial damages that the insurance company will cover. For your car insurance, the limit is the declared car value while for your health insurance it is the total annual limit. You can often choose the limit, and you’re best advised to select a lower one since statistically, most customers will never reach the limit. If you have a car accident, for example, you would need to total the car for the limit to be relevant. Such accidents are relatively rare (1-2% of all car accidents).
While these tips mentioned above can work universally, here are a few insurance-specific saving solutions:
For Life Insurance
Lead a healthier, safer life: Smoking and obesity are strong factors in hiking premium prices. So are adventure sports like scuba-diving and sky-diving.
Get one while you’re young: The older you are when you start a life or health insurance policy, the higher the cost will be. It’s simple; insurance companies will get fewer years to collect premiums before they pay your benefit.
Choose ‘Term Life’ over ‘Whole Life’ insurances: Since Term Life insurances cover you for only a fixed term of years, it costs less over Whole Life insurances which last all life.
For Health Insurance
Choose an in-network doctor: Most plans charge more for ‘out-of-network’ healthcare professionals. So, if your preferred doctor isn’t participating in the plan you choose, you may face additional costs.
Reassess your needs regularly: Sometimes, you may be spending more than required if you stick with a plan for long. As you move on in life, your health needs change and so should your insurance decisions.
For Automobile Insurance
Drive safe and buy a car that is cheap to insure: If you stay away from speeding and have a driving record free of accidents, you are like to save more on premiums. Moreover, before buying a car, check the cost of insurance. There are significant differences between models since certain types of cars cost more to repair and are also involved in more accidents statistically speaking.
Reduce unnecessary coverages: Add-ons like roadside assistance and car rental coverages may just be an extra cost that you may never use. Go through your policy in detail and eliminate coverages you don’t require.
Our advice here includes some of the simplest ways to reduce your costs. However, you can always talk to your insurance agent in detail to learn how to get the best deal on your next plan.