Updated November 1, 2019 . AmFam Team
Your insurance premiums, or the amount you pay for your insurance coverage, can be confusing. How is your premium number calculated? Why did your amount go up last year? How can you lower that number?
We’re here to kick that confusion to the curb by breaking down how premiums are calculated, what affects them and more.
To understand why your insurance premium costs what it does, you need to understand its purpose. Your insurance company collects premiums from its customers in exchange for coverage and pools that money all together. When someone files a claim, funds from that pool are used to help pay out that claim so the customer can cover the cost of their loss and return their life to normal.
If your insurance company has to pay out a lot of claims over the course of a year, you might notice a rise in your premium when you renew your policy. That’s because if a company has to pay out more than they’ve collected from the pooled premiums, they’ll need to pool more money in order to remain a functioning business and be able to pay out other claims.
The number of claims and dollar amount paid out for those claims aren’t the only factors in your insurance premiums. In fact, a good portion of your premium’s cost has to do with you. Here are a few things that can affect your premiums:
Your driving record. If you’ve made a lot of insurance claims in your life, you could experience a higher premium. On the other hand, if you’ve never made a claim, you’ll likely have a lower premium. The lower the insurance risk your company finds you, the more likely you’ll have a lower insurance premium.
Your insurance policy. It’s common knowledge that the more insurance coverage you have (lower deductible, higher coverage limit and more) the more your insurance premium will be. Your American Family Insurance agent is always ready to help you find the right combination of deductibles, coverages and premiums to make protecting what matters affordable.
Unfortunately, there are things that influence your insurance costs that are out of your control. Like the number of claims and the amount paid out by your insurance company, one big thing that can affect your premiums is the economy.
There’s not a person in the world that is immune from the effects of the economy. Strong, weak or stable, the state of business in the United States can always impact insurance costs.
Aside from lowering your coverage amounts, there are plenty of ways to save on your insurance. Here are just a few.
Bundle your coverages. If you’ve got insurance policies stretched across two or more insurance companies, you could be missing out on savings. If you bundle multiple insurance coverages with American Family, we’ll give you a discount. Plus, it’ll be much easier to manage your insurance policies, documents and bills in one place online with My Account or the MyAmFam app.
Other discounts. There’s no shortage of discounts on American Family Insurance products. Whether we hand off savings for being a loyal customer, or for switching from one insurance company to ours, we’re happy to make your protection as affordable as possible.
Looking for more coverage? Connect with your American Family Insurance agent (Opens in a new tab) today to get set up with the right policy that helps you protect what matters most.