How does Insurance work?

Spreading the risk

As we have identified earlier, its important to have insurance. Insurance companies exist because of  the many risks in the world. We are here to help individuals like you to manage risk by ensuring that if the unexpected happens, you will be able to manage the financial burden. Insurance firms pool together the risk together of many individuals, and this helps to benefit society as a whole.

Dont put your eggs in one basket: the core of insurance
Image Credit: gettyimages

An example

For example, if 100,000 Sri Lankan’s each pay Rs 12,000 annually for automobile insurance, the insurance firm will receive Rs 1.2 billion. During the course of 2014, if 10,000 individuals suffer a loss amounting to Rs50,000 each the firm would have to pay Rs 500 million in claims, leaving the rest for future claims. Sure, if the automobile isnt yours, that money is gone. However, it is a better option to enlist a large number of people to pool together risk in order to pay for the losses of a small group, because the financial burden of Rs50000 is usually too much for one individual to manage on their own.

Different premiums

However, all motorists don’t pay the same premium. With sufficient statistical information (collected over time), insurance firms can calculate the losses the company is likely to incur, and subsequently charge each driver a different premium depending on how likely they are to be involved in a motor accident. As a result, some drivers who are deemed ‘high risk-worthy’, (ie: multiple speeding fines and accidents) are more likely to pay a higher premium than those who travel carefully and play it safe.

Right Insurance = Financial Security

Motor insurance is something which needs to be handled with care, just like you would do to your precious vehicle. If you do it right, it becomes a useful tool to maintain the financial security you deserve. If you’d like to get a motor insurance quote, send us a SMS, or simply call HNB General Insurance’s 24 hour hotline on 0114-883-883.

Note: If you are more interested in Life Insurance, call HNB Assurance on 0114-384-384 instead.

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Disclaimer: The views shared in this blog are based on the macro economic conditions & industry status quo as per the time of publishing.

8 Smarter Ways to get a Cheaper Life Insurance Premium

If you are like most people, chances are you want to pay a smaller premium. After all, it a Rupee saved is a Rupee earned (or in this case, lots or Rupees!). We spoke to our insurance underwriters and asked them how customers can get save on their insurance premiums. This is what we found:

1) Age: If you are a young person, there is a better likelihood that you will pay a lower premium as we assume that you have many years of healthy living ahead of you (more on that in a minute).

2) Gender: Sorry gentlemen, but on average, women live a lot longer than men. As a result, being a female can lower your premium as it is perceived that women are more likely to live longer due to their genetic makeup, a better understanding of their bodies and a lesser tendency to engage in risky behaviour.

3) Occupation: Most of us who work in the office should not need to worry here, but if you happen to be employed in a risky line of work (ie: deep sea diving, the armed forces etc), your premium will be a lot higher. In fact, some insurance firms can decide to deny coverage to certain professions due to the high tendency of an accidental death.

4) Personal Habits and Lifestyle: If you are a smoker or tend to indulge in excessive consumption of alcohol, expect to pay more as you will have a higher health risk and a shorter life expectancy. Furthermore, if you like spending time racing fast cars at the Speedrome, go skydiving or engage in otherwise risky hobbies, you will need to spend more on your premium than say, someone who likes to hangout with their friends at the local coffeehouse.risk5) Health: Here is another reason to start exercising -It can lead to a cheaper life insurance premium. If you are overweight, it makes you seem as a liability due to the multitude of unfavorable health conditions (ie: diabetes, high cholesterol and heart disease).  Its a simple message-lower your weight, lower your premium.

6) Driving Habits: Your driving record is pretty significant. If you have met with accidents, multiple speeding violations, or have been caught driving under the influence of alcohol, you are considered an unsafe driver. As a result, do your best to ensure that you have a clean driving record and reap the rewards via a smaller premium.

7) Residence: You will end up paying a higher premium if you happen to live in a particularly rough area, or built your house in an area which is prone to say, heavy flooding or is located in an otherwise hazardous area.

8) The Actual Policy: Seems obvious, but really look into your policy and determine if its perfect for you. Some aspects of a policy may not apply to you, so make sure you shop around before you decide to make a final decision.

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Disclaimer: The views shared in this blog are based on the macro economic conditions & industry status quo as per the time of publishing.