Skipping insurance is one of the biggest financial mistakes anyone can make, whether it’s for health, home, auto, or business. But have you ever wondered why some insurance plans cost significantly more than others? In this article, we’ll break down how assessment works and 5 reasons your insurance premiums might be significantly higher.Â
Insurance Premiums are like Loans
Lenders are cautious of borrowers with poor credit histories because they’re seen as less likely to repay the loan. While these borrowers can still get approved, they’re often offered higher interest rates. Similarly, insurance providers assess risk — considering factors like age, lifestyle, and medical background — to determine how likely you are to make a claim.
This is where the insurance underwriter steps in. An insurance underwriter is the person responsible for evaluating your risk profile and deciding whether you qualify for coverage, and at what price. They use data, industry standards, and internal guidelines to determine how much risk you pose to the insurer.
Working closely with actuaries, underwriters take that risk data and apply it to real-life decisions. The higher the chance you’ll file a claim, the more they may justify charging you a higher premium.
Here are five reasons your insurance premiums might be significantly higher:
1. You’re sick or are likely to be sick
Factors like age, weight, vices, job hazards, and medical history all play into your health risk. To determine how risky you are to insure, the insurance underwriter considers questions like:
- How old are you?
- Do you smoke or drink frequently?
- Do you work in a high-risk or toxic environment?
- Are you overweight or managing a chronic illness?
- Do you have a family history of certain medical conditions?
Once this information is gathered, the underwriter assigns you to a risk rating table that correlates your level of risk with the cost of your premium. So, naturally, those with healthier lifestyles and safer work environments are more likely to get cheaper plans.
That said, high-risk clients aren’t always denied coverage. Instead, they’re often offered more comprehensive coverage — but with higher premiums. Even so, paying more for insurance is still a better option than facing hospital bills or repair costs out of pocket.
2. You have a poor credit file
It’s not just lenders who care about your credit score. Insurance companies check it, too, but for different reasons.
For example, auto insurance providers have found that drivers with lower credit scores are statistically more likely to file a claim. For that reason, you may be charged a higher premium if your credit file isn’t looking great. It’s another reason to keep tabs on your financial health.
3. You’ve been a reckless driver
Your driving record can follow you, not just into your auto insurance, but also your life and health insurance.
The more driving violations you have (think: speeding tickets, DUIs, reckless driving), the more likely you are to be in a serious accident. That makes you a riskier client. An insurance underwriter may flag these red flags and either raise your rates significantly or, in some cases, decline to offer coverage at all.
4. You live in a high-cost location
Sometimes, your location alone can push your premiums up. Even if you’re a careful driver or healthy individual, living in an area with high medical costs, traffic congestion, or crime rates can drive up your insurance costs.
One way to counter this? Accept more financial responsibility by increasing your deductible, or the amount you pay before your insurer contributes. A higher deductible lowers the insurer’s loss exposure, which could result in lower premiums.
5. You’ve made several claims
If you have a history of making insurance claims — whether it’s for car accidents, property damage, or medical treatment — expect your premiums to go up.
An insurance underwriter will look at your claims history and use it to predict your likelihood of filing future claims. Even if a previous claim wasn’t your fault, it may still count against your risk profile. For instance, two home insurance claims within three years may result in a premium increase, while one-off claims (especially those caused by natural disasters) might not.
Insurance premiums aren’t arbitrary — they’re calculated based on how risky you are to insure. From your health and driving record to your claims history and location, every detail matters. Behind every quote, there’s an insurance underwriter weighing the risk and determining the appropriate cost of coverage.
The good news? By knowing what factors affect your premiums, you can take steps to manage your risk and potentially lower your rates over time.
Author Bio: Carmina Natividad is one of the daytime writers for 360 Underwriting, a specialist agency network supporting insurance brokers with tailored underwriting solutions across sectors like motor, marine, professional indemnity, and plant & equipment. She enjoys crafting practical, jargon-free content that helps brokers better understand complex risks and deliver smarter coverage to their clients.
