Factors affecting premium:

PREMIUM

          This is the amount paid by the insured on a periodical basis to cover the risk insured. It may be on a weekly, quarterly, half-yearly or annual basis. Before fixing the premium some factors have to be taken into account and calculated. The experts who calculate the premium are called actuaries. It is essential that the actuaries do their calculations correctly so that the insurance company does not run out of money through  excessive claims.

Factors affecting premium:

The following are factors taken into account before fixing the premium for a building:

·        The age of the building: If the building is old, the chances of damage are high and so the premium will be high. But if the building is new, the chances of damage are less and so the premium will be low.

·        Type of building: If the building is strong, the chances of damage are less and so the premium will be low. But if the building is weak or made of glass, the chances of damage are high and so the premium will be high.

·        Value of the building: If the building is made of expensive material or has historical value, the premium will be high. But if it is an ordinary building, the premium will be low.

·        Cost of repairs: If the cost of repairs of the building is high, the premium will be high and if the cost of repairs is low, the premium will be low.

·        Location of the building: If the building is near an oil or sulphur factory, the chances of accident are high and so the premium will be high. But if the building is in a safe area, the chances of accident are less and so the premium will be low.

·        Contents of the building: If the building has highly inflammable contents, the chances of accident are high and so the premium will be high. But if the building has non-inflammable contents, the chances of accident are less and so the premium will be low.

·        Recent claims record: If the owner has already claimed money from the insurance company, the chances of him claiming again will be high and so the premium will be high. If the owner has never claimed, the premium will be low.

·        Building record: If the building has a record of many accidents, the premium will be high. If the building has a good record, the premium will be low.

·        Precautionary methods: If the building has precautionary measures like fire sprinklers, alarms, etc, the premium will be low. But if it has no such precautionary measures, the premium will be high.