Every insurance company will quote a different insurance premium, which is why it is SUPER important to work with an independent agent who can properly compare different quotes from a variety of insurance companies.
Insurance companies use mathematical calculation and statistics to calculate the amount of insurance premiums they charge their clients.
Some common factors insurance companies evaluate when calculating your insurance premiums is your age, medical history, life history, and credit score. Insurance companies also hire actuaries or statisticians to get a better idea of the number of insurance premiums they should charge a particular client.
Actuaries use mortality and sickness statistics to predict possible losses due to sickness and death. They use the tables to assign a probability to age and gender concerning the possibility of them falling sick or dying.
Next, they create models to identify the likelihood of the person becoming sick and dying at a certain time in like based on the information they collected on that person. Insurance companies use the information compiled by their department and actuaries to assign an insurance premium to their client.
Determining Insurance Premiums
The insurance company’s underwriting departments calculate the insurance premium. The process involves:
- Investigating into familial illnesses and diseases
- Analyzing reports such as motor vehicle documents and medical records
- Predicting the likelihood of a client making a claim on their insurance coverage
If the possibility of making a claim is high, insurance companies will charge higher insurance premiums.
The Factors that Affect the Insurance Premiums You Pay for Home Insurance Coverage
Insurance companies calculate the price their client pays for home insurance coverage by looking at the following key factors:
- Weather in your area (Is it prone to rain, hail, or snow?)
- Sewer backup problem in your area
- The crime rate in your area
- Your home’s distance from a fire hydrant and fire station
- The value of your home
- Your insurance history (How many times you have filed insurance claims in the past?)
The Factors that Affect the Insurance Premiums You Pay for Auto Insurance Coverage
Insurance companies calculate the price their client pays for auto insurance coverage by looking at the following key factors:
- The theft statistics in your area
- The statistics and safety features of your car
- The make, model, and year of your car
- The way you use your car such as going to work or using it for personal or business purposes
- The number of driving offences you have, including any at-fault insurance claims you have made in the past
- The number of years you have been driving
In both cases of home insurance and auto insurance coverage, your insurance premiums can vary and even earn you a discount if you decide to invest in more insurance coverage. The deductibles you select also influence how much you pay for your insurance coverage.
What Are Written Premiums?
To describe the total insurance premiums that insurance companies charge their clients on insurance policies, they refer to it as a written premium. Written premiums are the amount of premium the company charges for a policy that has already been active. Insurance companies issue premiums on specific insurance policies during a certain duration regardless of the premiums earned.
Written Premiums is the number of insurance premiums you need to pay for insurance coverage written during the accounting period.
Earned Premiums is the number of insurance premiums that an insurance company has earned by offering insurance to clients against different risks during the year.
Insurance companies measure written premiums as a gross prior to the deduction of reinsurance expenses or net number after reinsurance costs. For insurance companies, a written premium is how they earn money.
It is their main source of income and for this reason, you will find it on the first line of your income statement. Since the insurance company is cyclical and competitive, multiple insurance companies go up against each other for market share, which is influenced by the price of the insurance premiums they charge their clients.
10 States with the Highest Insurance Premiums for Homeowners Insurance
| State | Monthly Home Insurance Premium | Yearly Home Insurance Premium |
| Alabama | $97 | $1,163 |
| Alaska | $77 | $924 |
| Arizona | $56 | $675 |
| Arkansas | $86 | $1,029 |
| California | $81 | $967 |
| Colorado | $80 | $961 |
| Connecticut | $91 | $1,096 |
| D.C. | $90 | $1,083 |
| Delaware | $55 | $664 |
| Florida | $161 |
$1,933 |
10 States with the Highest Insurance Premiums for Auto Insurance
| State | Monthly Home Insurance Premium | Yearly Home Insurance Premium |
| Alabama | $127 | $1,529 |
| Alaska | $134 | $1,605 |
| Arizona | $102 | $1,222 |
| Arkansas | $117 | $1,399 |
| California | $164 | $1,932 |
| Colorado | $130 | $1,558 |
| Connecticut | $137 | $1,638 |
| Delaware | $132 | $1,580 |
| Florida | $153 | $1,830 |
| Georgia | $183 | $2,201 |
Interested to see what determines your auto insurance rates in Connecticut? Have a look at our recent blog post: Determining Your Auto Insurance Rates in Connecticut
Why Is It Important to Learn How Insurance Companies Calculate Insurance Premiums?
When you are searching for an insurance company to buy insurance from using our search platform, you should know the factors they consider when calculating insurance premiums. Knowing this allows you to make better judgment calls on the insurance company you want to buy insurance coverage from.
You can use the factors that insurance companies use to calculate the insurance premiums you can expect to receive. If you receive lower than your estimate or just about the same, you can buy insurance coverage from them, but anything higher than your estimate, you should not buy insurance coverage from them.
We hope you found this article helpful. Our team of agents is always here to answer any questions you may have regarding your insurance. If you need to speak with an agent, please feel free to use the chat feature in the bottom right-hand corner or contact us at 203-481-8898.
Digital Marketing Director
Pawson Insurance | Legal Disclaimer |
Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. Consult the actual policy or your agent for details regarding terms, conditions, coverage, exclusions, products, services and programs which may be available to you. Your eligibility for particular products and services is subject to the final determination of underwriting qualifications and acceptance by the insurance underwriting company providing such products or services. Statements on this website as to policies and coverages provide general information only. This information is not an offer to sell insurance.