When you’re shopping for insurance, one question always comes first: How much will it cost? Yet most policyholders don’t know how insurers determine their premium. So let’s break down how your premium is calculated and share some tips to lower the cost and find the best insurer for you.
💡 Summary at a Glance
Your insurance premium is the amount you pay your insurer in exchange for coverage.
Your insurance policy outlines what your coverage includes, as well as exclusions.
- Your insurance premium will increase or decrease based on the risk associated with your profile.
- Your age and gender can affect your premium, although this changes based on the type of insurance.
- What you’re insuring and your claims history are also important; if you haven’t claimed regularly, look for an insurer with a No Claims Discount.
- Your health, lifestyle and occupation are also key factors; healthier people with low-risk hobbies and jobs typically pay less.
- To reduce your premium, review your insurance annually, shop around, embrace healthy habits and find policies with extra benefits or discounts.
- It isn’t all about the cost though; choose a provider with a solid track record, clear policy wording and a straightforward claims process.
What Exactly is a Premium?
Your premium is simply the amount you pay your insurer in return for their promise to cover you if something goes wrong. Your specific coverage depends on the policy you choose. For example, your motor insurance may include coverage for fire and theft as well as accidents on the road.
In T&T, every insurer must be licensed and supervised by the Central Bank under the Insurance Act. That’s a good thing for policyholders. It means all companies must operate within specific regulations to avoid situations that take advantage of customers, such as premiums set so low that a company couldn’t actually pay your claim.
How Do Insurers Calculate Your Premium?
Behind every premium is a specialised team — think of them as the mathematicians of the insurance world. Their job is to figure out how likely you are to make a claim and how much that claim might cost. The riskier your profile looks to them, the higher your premium.
While each type of insurance has its own formula, six factors come up frequently.
1. Your Age
When it comes to motor insurance, younger people typically pay higher premiums since newer drivers are more likely to make mistakes on the road. However, youngsters pay lower premiums for life insurance because they are usually healthier and less likely to file a claim soon.
Pro tip: If you’re still young, you can lock in extremely low life insurance rates if you start now. We’ve previously written about all the uses life insurance has beyond a payout, so check out our post if you want to know how life insurance can help you get a mortgage and build wealth.
2. Your Gender
Statistics have spoken: women are safer on the roads and there are some insurers that offer discounts for female drivers.
Pro tip: Female driver discounts can be significant — up to 20%. If your insurer doesn’t offer this discount, look for one who does.
3. Your Claims History
Insurers believe that past behaviour is a strong indicator of future behaviour. Claimed a lot in recent years? That tells insurers you’re more likely to claim again. On the other hand, a clean record works in your favour and lowers your premium.
Pro tip: If you haven’t made a motor claim recently, look for an insurer with a good No Claims Discount.
4. What You’re Insuring
The value of your car, your home or your life insurance policy directly affects how much you pay.
Pro tip: There’s more than one way to insure your car, your home or yourself. Third party motor insurance is more affordable than comprehensive. Term life insurance is more affordable than whole life insurance. You do get less perks; but you can weigh up the cost versus the perks and make a decision that best suits where you are at this moment.
5. Your Health and Lifestyle
For critical illness and life insurance policies, things like smoking and family medical history all feed into the price. Your premium is likelier to be lower if you don’t engage in risky hobbies such as motor cycle racing, diving, wrestling or boxing. Taking care of your physical health by participating in a regular fitness programme can also reduce your premium.
Pro tip: Don’t lie to your insurer! Let’s imagine the application form asks if you engage in hazardous sports. You check ‘no’ – even though you do – hoping for a lower premium. However, if you make a claim as a result of engaging in these sports, you may not be covered.
6. Occupation
What you do for a living matters here too. Workers in offshore oil and gas or those who work with high electrical voltages are considered higher risk and can expect a higher than usual life insurance rate.
Pro tip: If you’ve transitioned from working offshore to a desk job, let your insurer know. You may be able to reduce your premium.
Simple Ways To Save On Your Premium Without Cutting Corners
- Review your insurance annually. Insuring a five-year-old car at its original purchase price means you’re overpaying. On the other hand, if you’ve renovated your home, you may be underpaying for insurance… which means if you do make a claim the money you receive may not be sufficient for repairs.
- Shop around. All insurers calculate premiums differently. Get at least three quotes to compare costs.
- Maintain a healthy lifestyle.
- Find policies that give you more. For example, you can choose Life Insurance with Savings, a plan that combines life insurance with investment returns.
- Ensure you’re getting all the discounts available. We haven’t scratched the surface of discounts. We offer discounts on motor insurance for new clients, existing clients, Tobago clients, anti-theft devices on cars and good grades for university students, among others.
But Remember, Cheap Isn’t Always best
It’s tempting to go straight for the lowest quote. But a premium is only worth paying if the policy behind it actually performs when you need it to.
Ask your family and friends if they’ve ever made a claim with their insurer and what the experience was like. Look for providers with a solid track record in T&T, clear policy wording and a straightforward claims process. And if something in the policy document doesn’t make sense, ask before you sign.
💭 Final Thoughts: Use Your New Knowledge to Get Better Coverage
Insurance premiums in Trinidad and Tobago are based on a simple idea: risk. By understanding the factors that influence your premium, you can make more informed choices about your coverage. You can also have an honest conversation with your provider about how you can choose the plan that will combine affordability with the protection you need.
Can You Help Me With Insurance?
We’d love to! Chat with an agent about your insurance options or for motor insurance, you can fill in our easy form online to get a quote ASAP.
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Our Maritime team of agents is here to help you. Whether you need advice on insurance or financial planning, we’re committed to offering personalised support and solutions. If you’d like to chat, you can always reach out to us.
