Insurance premiums are the monies paid by individuals to insurance companies in exchange for financial security in the event of damage or a loss. Often, these premiums are dependent upon a variety of factors including age, status of health, or driving record. Additionally, insurance premiums vary in their terms of coverage and coverage amounts. Though there are many types of insurance premiums, a few are common and necessary regardless of lifestyle.
Health Insurance Premiums
With the recent passing of the Patient Protection and Affordable Care Act, health insurance premiums have become more affordable for individuals without health insurance. Health insurance premiums provide coverage related to medical, dental, and hospital care. For senior citizens and extremely low-income Americans, health insurance premiums are paid for, respectively, by the federal government and state governments. Many of the nation's top health insurers, such as Aetna, Cobra, and United Healthcare, provide insurance coverage to individuals and families with premiums varying according to the amount of coverage, the size of the family, and deductibles. Deductibles are paid before the insurer begins coverage. Generally, the higher the deductible the lower the premiums.
Life Insurance Premiums
Life insurance premiums are assessed and calculated based on risk. For many life insurance providers, the idea that death is imminent for an individual is not the ideal way to maintain operations. In fact, life insurance companies would go out of business if it provided lump-sum payments to individuals whose death was imminent because the money made from premiums would be infinitesimal compared to the payout. Thus, insurance companies will conduct investigations and medical tests to confirm an individual's health status and will consider age and gender when putting together coverage agreements. The general rule, according to Jack Dolan of the American Council of Life Insurance, "is that women live longer than men," thus women generally pay lower lower life insurance premiums. Life insurance premiums typically cover accidental death, whole-life coverage (which provides guaranteed benefits for death that is not caused by accident or suicide) and universal life (which increases premiums as the individual gets older but ensures that the actual amount of the policy is paid).
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Car Insurance Premiums
Among the factors that determine car insurance premiums are age, geography, and driving record. Typically, drivers under the age of 25 are seen as inexperienced and more likely to be involved in an accident. Drivers who live in more rural areas with less traffic will pay lower insurance premiums than those in metropolitan areas with higher traffic. Finally, those with traffic ticket "points" on their driver's license should also expect to pay higher premiums. In many states, driver's must have at least liability insurance for body and property damage. Other forms of insurance coverage include collision and comprehensive insurance. Collision coverage provides payment and service for damage done to vehicles in an accident while comprehensive insurance provides payment and service in the event of damages to a vehicle by natural disasters, fires, or vandalism.