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An insurance premium is the amount you pay to your insurer — typically monthly or annually — to maintain your insurance coverage. Premiums are set based on the insurer's assessment of the likelihood and potential cost of a claim, your specific risk profile, and the level of cover provided.
Insurers use actuarial models to calculate premiums based on the probability of a claim and the likely cost if one occurs. Factors include your risk history (prior claims), the nature of the risk being insured, demographics, location, industry, sum insured, chosen excess, and broader market claims trends. Each insurer weights these factors differently, which is why premiums for identical cover can vary significantly between insurers — making comparison essential.
Premiums can increase at renewal due to claims inflation (the rising cost of repairs and replacements), an increase in your sum insured reflecting asset appreciation, a deterioration in your claims history, broader changes in the risk market (e.g. increased storm events), or insurer-specific pricing decisions. If your premium increases significantly at renewal, shopping the market via a broker is the most effective response.
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