Higher Risk = Higher Premiums
Written by Marlo .
The best way for a business to lower its premiums is to reduce its risk. Safety programs, controls, employee education and training are all ways to control risk and premiums. Lower risk equates to lower premiums.
Sometimes this principle hits a little too close to home. At the risk of my kids reading this, I wanted to relay a business insurance premium horror story. One of my firm’s own making.
Our term life insurance rates and coverage options came in this morning. Readers, I admit, within the last 12 months, members of our firm have used nicotine containing products. They have made efforts to stop and one partner stopped over five years ago. Some quit several months ago successfully.
The male rate for a nicotine user at age 41, for $200,000 in coverage, was over $80 per month. Want an incentive to stop smoking, dipping or chewing? The non-nicotine rate, for the same coverage, was $30 per month. A $600 per year difference in premium. This in effect is an underwriter telling us the member was nearly three times more likely to die than if he did not have the habit.
Sobering.
Higher Risk = Higher Premiums originally appeared on About.com Business Insurance on Monday, March 15th, 2010 at 12:23:19.