Premiums: Principles, calculations and composition

What is an insurance premium?

The premium is the amount paid by the insured to the insurance company in exchange for the risk guarantee given to the insurance company by the insurance company. Therefore, it is the insurance price that is prepaid.

Good to know : When the financial resources composed of premiums are used to pay insurance claims and operating expenses of insurance companies, a non-negligible part is allocated to the composition of legal reserves imposed on all insurance companies. Not to mention the percentage of taxes paid to JFC.

Difference between insurance premiums and donations

There is none. It’s the same. That is, the total amount requested by the insured’s client in return for the guarantee. So why are there two different names?

Historically, this differentiation has come from the time mutual insurers and mutual insurers were born. It is customary to distinguish between the two types of insurers by vocabulary related to the form of the insurer (capitalized society or mutual company). Therefore, in the case of an insurance company, we say “insured” to specify the customer. Mutual customers and mutual forms of companies, on the other hand, are called “members.” And if the insured pays the premium, the member pays the contribution. Therefore, this difference in term is only a trace of the will at that point in time to be differentiated from a commercial insurer by interrelationships.

What does the insurance premium consist of?

Premium (or contribution) is made up of various elements.

  • So-called pure premiums (also called technical premiums) that result from the application of insurance company rates.
  • Mandatory additional premiums (eg, additional premiums for natural disasters, technical disasters, attacks).
  • So-called commercial loading costs (premium costs and accessories due to management costs: policy costs, costs for establishing expiration notifications, management and marketing costs, premium split costs, etc.).
  • Tax collection aimed at providing various guarantee funds (FGAO, FGTI, etc.):
  • Taxes (or tax burden costs that vary depending on the insurance branch and contract type).

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How are insurance premiums calculated?

Premiums are derived from rates derived from actuarial calculations based on claims statistics specific to the relevant insurance sector. Insurance companies have no restrictions and can set prices freely.

Premiums arise not only from the guarantees you have enrolled, but also from the peculiarities of risk and therefore the pricing parameters specific to each type of insurance.

For example, the surface or number of rooms in a multi-risk home, the geographic area where the property is located, the capital insured for furniture, the annex, and so on.

For car insurance, subscriber profile – age, license seniority, loss rate, bonus / Mars factor, area of ​​use, and expert usage clause. Not only is the vehicle make, model and power involved.

Smokers or non-smokers in personal insurance (health insurance, death insurance, borrower insurance, personal accident insurance, illness insurance, etc.), depending on the type of contract, taking into account criteria such as age, medical history, occupation, sports, sports, etc. Such.

Insurance premium payment and insurance premium payment

It is the insured’s responsibility to prepaid the premiums claimed by the insurance company. This payment must be made within 10 days of the expiration of the contract. Payments or claims are made by the insurance company sending an expiration notice to the insured with the total amount to be paid and details of this premium.

Depending on the payment method selected by the insured at the time of enrollment, premiums can be paid in semi-annual, quarterly or monthly installments, albeit annually. In the latter case, the expiration notice is in the form of a schedule that indicates the date on which the monthly payment is scheduled to be collected.

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