Why might one insurance policy cost more than another?

By Steven Merkel AAA
A:

There are several reasons that an insurance policy can cost more or less at different agencies. Some of the more common reasons include the following:

a) Economies of scale - Larger agencies can often obtain better rates with most insurance companies.

b) Agent commission/fees are higher - Each agency makes their profit by adding a commission or fee on top of the real cost of the policy, profit margins will vary from agency to agency.


c) Deductible levels - Perhaps the policies appear to be identical in amounts of coverage, but one policy has a higher or lower deductible than the other.


d) Family or multiple policy discounts - If you have multiple policies with a specific agency, they may give you a rate discount for adding additional policies


e) Premium payment schedule differences - The schedule can differ as you can be paying monthly, semi-annually or annually.


f) Better personal rating from one company's underwriting staff - If your policy requires underwriting such as life or health, it's possible that certain insurers will view you as riskier than others, thus inflating the premium.

g) Agency specialty - Some agencies will specialize in one particular line of insurance such as health insurance. Because of the larger volume of business and insurance company loyalty, preferred rates will be given to clients of that agency.

Insurance policies can differ in price for any of the aforementioned reasons. When you're considering an insurance policy, it's best to research and find out exactly what you want to be included in the policy and which agency can get you the best price.

Also, take a look at Five Insurance Policies Everyone Should Have for a related reading.

This question was answered by Steven Merkel.

RELATED FAQS

  1. Under what circumstances will a contingent beneficiary receive an insurance payout?

    Learn the different types of contingent beneficiaries and what conditions must be met for these beneficiaries to receive ...
  2. Can you sue an insurance company for not paying a claim over a waiver of subrogation ...

    Learn more about insurance and why waivers of subrogation are common with property insurance. Find out about liability risk ...
  3. What is the difference between ex-ante moral hazard and ex-post moral hazard?

    Learn what moral hazard is, the difference between ex-ante moral hazard and ex-post moral hazard and the behavioral changes ...
  4. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter as well as the important ...
RELATED TERMS
  1. COPE Insurance

    A set of risks that property insurance underwriters review when ...
  2. Automatic Premium Loan

    An insurance policy provision that allows the insurer to deduct ...
  3. Blanket Medical Expense

    An insurance policy which provides coverage for all medical expenses ...
  4. Cestui Que Vie

    The individual who is the beneficiary of a trust or insurance ...
  5. Aircraft Insurance

    Insurance that provides liability and property coverage of aircraft.
  6. Boat Owners' Insurance

    An insurance policy that provides coverage for individuals who ...

You May Also Like

Related Articles
  1. Stock Analysis

    3 Things That Could Hold Intuitive Surgical ...

  2. Entrepreneurship

    Want To Sell Life Insurance? Read This ...

  3. Investing Basics

    Passing Boomers Will Leave A Big Economic ...

  4. Stock Analysis

    The 5 Largest U.S. Product Liability ...

  5. Stock Analysis

    Obamacare Is Coming, Ready Or Not

Trading Center