Everything you need to know about Insurance Premium

Insurance premiums are the payments made by an individual to an insurance company to obtain insurance coverage. The insurance company determines the amount of the premium based on several factors, including the traveller’s age, the length of the trip, the chosen policy maximum, the deductible, the type and level of coverage, optional coverage, and more.

Premiums for visitor insurance are usually paid upfront for the number of days coverage is applied for.  Insurance premiums can vary depending on the plan you choose. The fixed benefit plans have lower premiums while the comprehensive plans have higher premiums. Insurance premiums can be considered as an investment. When you pay your insurance premium, you get financial protection against travel and medical uncertainties.

How is the premium calculated?

The premium of a visitor insurance plan is calculated based on four main factors- the traveler’s age, trip length, the chosen policy maximum, and the deductible. Travelers’ age plays a crucial role in determining the premium. The older the traveler is, the more premium it is. The insurance premiums for elderly travelers are usually higher as the associated health risks are also higher. Younger travelers usually enjoy paying a lower premium for the same plan.

The policy maximum and the deductible, too, act as essential factors in determining the cost of the insurance plan. If the insurer chooses a higher policy maximum, they pay a higher premium. Whereas, if the insurer chooses a higher deductible, they pay less premium. Moreover, insurance premiums can change depending on any modifications made to a policy. For instance, adding riders can increase the premiums as the insured would get additional financial protection from the plan.

Visitor insurance is designed to cover you from the time you leave your country of citizenship/ country of residence and ending when you return provided you have bought the plan to include those dates. The longer your trip duration, the higher a policy’s premium. In short, there are several factors that account for the plan’s costs. It is wise to talk to your provider to know the actual premium.

How does the insurance company determine the premium?

Assessing risk– Insurance companies use their knowledge and experience to assess the risk of potential policyholders. The risk assessment considers a variety of factors such as age, health, occupation, lifestyle, and history of claims or losses. Based on the risk assessment, the insurer determines the likelihood of a loss occurring and sets the premium accordingly.

Coverage type– Policyholders choose the type and level of coverage they want, which determines the amount of the premium. For example, a policyholder may choose a comprehensive travel insurance plan with an adventure sports rider, which would result in a higher premium.

Coverage period– The premium covers a specific period, typically from 5 days up to one year or more, depending on the policy. Daily or monthly rates are used to calculate the premium for the selected coverage period. After the coverage period ends, the policyholder can renew the policy by paying a new premium or applying for a new policy.

What are the types of insurance premiums?

Fixed or regular premium– This is the most common type of premium. The premium is a fixed amount paid regularly (such as monthly, quarterly, or annually) for the policy period.

Variable premium– This type of premium varies depending on the coverage level and the policyholder’s risk profile. The premium is adjusted periodically to reflect changes in the policyholder’s risk profile or the insurer’s pricing policies.

Group premium– This type of premium is offered to a group of people, such as employees of a company. The premium is based on the overall profile of the group rather than an individual profile.

Single premium– A single premium plan is where the policyholder can pay the premium as a lump sum at the beginning of the policy. Unlike a regular premium plan, where an insured pays the premium at a set interval, a single premium policy is a one-time investment.

The visitor and travel insurance premium must be paid upfront for the number of days coverage is applied for.

Conclusion

Now that you know what a premium is and how it is calculated, you can easily understand the premium calculations before choosing a visitor insurance plan. For more information about insurance premiums, you can talk to the Visitor Guard’s® executive. We offer the best guidance to our customers.