Why Insurance Companies Raise Premiums ? Since insurance companies are businesses in themselves, they strive to generate as much profit as possible for their owners and stakeholders. One of their tactics to achieve this ultimate goal is to look for tiny statistical nuances that can predict the likelihood that someone will sue, and that might justify charging higher premiums.
There are many reasons why your premiums may increase. But your agent or insurance company may have forgotten to tell you these reasons when you purchased your policy, or you may have forgotten them over the years. Here are seven common reasons insurance companies increase their premiums.
1 your credit rating is getting worse
Insurance companies know that people with low credit scores are more likely than people with high credit scores to have accidents or other problems that could cause them to rely on their insurance funds. So they take more when they can. This explains why you should pay close attention to your credit rating. The lower your credit score, the higher your premiums.
However, the practice of looking at credit ratings to determine insurance premiums is somewhat controversial. There is no strong connection between credit scores and timely bill payments. But since most insurance companies have to use something, they assume there is a strong connection.
2. You are often faced with risky situations
Insurance companies know that the more risky situations you are faced with, the higher your chances of having an accident and other accidents. Thus, they increase your premiums as your risk increases. It’s their way of preparing for that embarrassing moment when you come to their insurance funds.
For example, your insurance company may keep track of your driving record. Your traffic violation record can increase not only your insurance premium, but your life and health insurance as well. Of course, if you are in a car accident, all three policies are helpful. Thus, insurers allow only two relocation violations as a limit to increase your premiums, while others allow three.
3. You have a high risk job
If, for example, you have health insurance at work, your rates may be increased depending on the average risk your colleagues face at work. You might not necessarily be exposed to the same risks, but the insurance company usually assumes that you face the same risks and can seek help quickly. If your coworkers tend to be older and disease prone and have a lot of grievances, your premiums will be higher than if your coworkers were younger and healthier.
4, you are overweight or obese
This applies more to health and life insurance. It is common knowledge that being overweight or obese can lead to a wide range of health problems that can shorten your life.
If your body mass index is higher than expected for a healthy person, your insurance company will increase your premiums. Search by eHealthInsurance.com has shown that a person with a BMI of 30 or more pays 22 percent more than a person with a BMI of 25.
5. Your hobbies are risky
If you go skydiving, hang gliding, rodeo, or race car, your life insurance rates are likely to be high. If you’re wondering why your insurers want to know about your hobbies at the time of enrollment, you know it now. They know that some hobbies put you at a higher risk of losing your life than others, and they want to know if you engage in these risky activities.
6. You won 50
When you are 50 or older, you should expect all of your premiums to increase. Auto insurance, health insurance, life insurance and everything you have. You are considered a more accident-prone senior driver. You are more likely to suffer from a wide variety of health problems. And you are nearing your death. So the older you get over 50, the higher your premiums.
7. Your education
Insurers have found a relationship between education and claims. Since well-educated people tend to have fewer claims, insurers are generally convinced that education has some element of caution. So, for each level of education that you skip, your insurance premium will increase slightly.
In conclusion, some of these reasons may seem unconvincing to you, but insurance companies see them as strengths.
