Bonus payments and billing
Consider this example to see the difference between premium and premium payments.
Imagine paying $ 500 a year to insure your $ 200,000 home. You have 10 years to make a payment, and you make no claim. That's 500 times 10 years. In other words, you paid $ 5,000 for home insurance. You may be wondering why you don't pay so much. In the 11th year, a fire broke out in the kitchen and needed to be replaced. The company will pay you $ 50,000 to repair your kitchen.
If the insurance company returns the money to everyone when there is no damage, it will not be able to build enough wealth to pay the insurance money. Even the $ 5,000 paid in 10 years does not cover the $ 50,000 loss. If there is only one loss, it will be unprofitable for the company. Insurance is based on diversifying risk to many people, so it is gathered from everyone who pays the insurance that allows the company to build an asset and cover it when a claim arises. It is the money that was paid.
What is the reason for insurance premiums to go up or down?
Insurance is a business. It's great for companies to maintain the same level of interest rates at all times, but in reality you need to make enough money to cover potential claims from policyholders.
When the company calculates the amount to be billed at the end of the year and the amount to be received for insurance premiums, it is necessary to modify the charges to make money. Fluctuations in underwriting and changes in interest rates are based on insurer results over the past few years.
Depending on the company you buy from, you may be dealing with a captive agent. They sell insurance from only one company. Brokers offer insurance for many companies.
What are Agents, Captive Agents and Insurance Brokers?
The front line people you deal with when buying insurance are agents and brokers who represent insurance companies. They explain the types of products they have.
A captive agent is a representative of only one insurance company. They are familiar with the company's products and services, but cannot discuss other companies' policies, prices, or product offerings.
An insurance broker or independent agent may deal with many companies on your behalf. They have access to many companies and need to know the product range of each company they represent.
How to determine the required coverage
There are some important questions you can ask yourself to determine the type of coverage you need.
How much risk and money can you expect to lose yourself?
Do you have the money to cover expenses and debts in the event of an accident? What if your house or car is destroyed?
Do you have any savings if you are unable to work due to an accident or illness?
Can you pay a higher discount to reduce costs?
Do you have a special need in your life that requires additional compensation?
What interests you the most? Policies can be tailored to your needs and identify your key protection issues. This can help you narrow down the type of policy you need and reduce costs.
Policy selection based on current lifestyle and life stage
Which insurance you need depends on where you are in your life, what types of assets you have and what your long-term goals and commitments are. Therefore, it is important that you take the time to discuss with your agent what you are looking for in a policy. Finding the right insurance product is a powerful way to manage your money. This way you remain financially secure, even after you make up for the loss.
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