Tuesday, 19 January 2021

DETERMINANTS OF RISK PREMIUM

 

‘Insurance Premium’ refers to the amount that one has to pay at intervals to an insurance company in order to keep an insurance policy active.

The factors that determine a premium for the insurance plan are:

Age: Younger people are considered fit an healthy but as ones age increases, they are more exposed to health risks and hence the insurance premium goes up.

Lifestyle: Lifestyle habits like smoking and drinking or chewing of tobacco increase the possibility of health disorders and thus the premium amount for individuals consuming the same increases. Insurance companies always inquire if a person is a smoker or a consumer of alcohol.

Profession: Industries with risky working conditions like mining, oil and gas etc. propose a higher risk to life and therefore the premium charged is higher.

Obesity: Obese people are prone to health disorders like osteoarthritis, high blood pressure, stroke, heart disease, etc. and thus pay a higher premium.

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