It seems obvious that the more insurance you buy, the more it should cost, right? Not necessarily. Insurance companies have many different rating factors and limitations are just a small factor in ratings.
Can you believe that people who have minimum limits for car liability on average pay more than people who have high insurance limits? This is due to two main components of insurance ratings: competition and leveling.
Car ratings are based on many different factors, the most important being:
- The drivers listed, including their age, claim history, credit and MVR
- Vehicles listed.
- Required coverage limits.
- Time with continuous insurance (including the time with the same transport company).
Therefore, someone with a decent driving record and a good credit score can pay more for minimum limits ($ 1
This not only happens in the car, it also occurs in the home and business.
For home insurance, some companies will not insure homes under $ 100,000, $ 200,000 or even $ 300,000. Therefore, if you have a higher replacement cost value in your home, you have more companies competing for the business, so you are likely to get better prices. I should note that you can not insure a home that is 1000 sqm for $ 300,000 in the hope of getting a better interest rate. All companies use an estimate of compensation costs to try to limit someone from being over- or under-insured.
When it comes to business insurance, most companies have minimum requirements for premiums. These companies realize that the work of servicing an insurance policy can be more than the premium taken, so they often have a minimum premium of $ 400 or $ 500. So if you are a low risk company or a small business, you may find that a $ 100,000 insurance and $ 1,000,000 insurance costs $ 500 because the minimum premium is $ 500.