Reduce Your Risk and Lower Your Insurance Premiums

If you have always felt that the amount of money that insurance providers charge you for their service is unfair, then you might find some albeit little consolation in the fact that you are not alone in feeling that way. Most insurance policyholders, as it turns out, feel that the amounts of money they pay to their insurance providers is perhaps unfairly on the higher side, and wish there was a way through which they could reduce their insurance premiums; of course without compromising on the level of coverage the policy offers.

Luckily, there is a way through which you can lower your insurance premiums: namely by reducing your risk profile.

To understand how lowering one's risk profile can help in reducing one's insurance premium rates, we would first have to take cognizance of the very basic fact that insurance is meant to provide a hedge against risk, that is, a safety tool taken by the policyholders to ensure their continued financial well being in the event of their suffering whatever risk it is that they are taking up insurance against. This, therefore, means that the insurance providers are basically in the business of providing risk management services. And for any particular risk that they provide cover against, insurance providers are likely to meet people who need the risk management service they offer at 'greater levels' or to greater extents than others. So the way the insurance providers price their service is such that those of their customers who need 'more' risk management are commensurately charged more the risk protection that the insurer offers them, with those who need relatively 'lower levels' of risk protection - that is, those who are at less risk of suffering from whatever event it is that they are taking insurance against, being charged commensurately lower 'fees' for the service, in terms of insurance premiums.

To judge who is at a higher risk of suffering the different events they offering an hedge against (and who is therefore more in need of the risk protection services they offer), insurance providers typically use profiling methods - where they try to find correlations between the incidence of the various unfortunate events they offer 'protection' against and certain conditions in people, and then using that information in working out their pricing structures.

If what we are looking at is car insurance, for instance, the insurance providers will tend to look at things like the relationship between a driver's age and incidence of road accidents, the relationship between a driver's road usage record and the incidence of road accidents and the relationship between each particular car model and incidence of road accidents. Under this system, drivers in age groups, or with car models and car usage records that have been more closely associated with higher incidence of road accidents are charged more for their car insurance premiums than the 'safer' drivers.

Consequently then, the key way to reduce your car insurance premiums is by making an effort to understand the factors that your car insurance provider takes into consideration in their risk profiling, and then working on the same factors (as they apply to you), so that you can meet the 'low risk' profile. Once you manage to do so successfully, your insurance provider will naturally feel obliged to charge you lower car insurance premiums - on account of your now 'lower' risk profile, and this way, you can save considerable sums of money you would otherwise have spend on insurance.

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