How is the insurance unit price calculated? – Understand how to calculate the cost

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  • Post last modified:September 27, 2022
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Understand how it works and how the value of insurance is defined

You already know how important insurance is. After all, taking out a policy is a decision that demonstrates a lot of responsibility, as you are protecting not only your possessions but also those you love. Therefore, it is also natural that there are certain doubts on the subject. One of the most common is how is insurance unit price calculated, how it works, and how the insurance value is defined. So, check out the article and find out the answer!

How is the insurance unit price calculated?

How is the insurance unit price calculated?

The answer is that it depends. Several factors affect how each insurance is calculated, from the type of policy taken out to the insurer itself. SUSEP, Superintendence of Private Insurance, establishes some guides for constructing prices, but each company is free to create its model.

Therefore, you can better understand how each of the most common insurance unit prices is calculated.

A unit price is calculated as: The total market value of the assets in each investment plan DIVIDED BY. The number of units held in that investment plan.

Understand home insurance

Home insurance is pretty simple to understand, but it still leads to some confusion. To define the value of the insurance and its indemnity, the cost of rebuilding the house is considered, not the sale value in the real estate market.

For example, the insurance will cover the first amount if it takes BRL 300,000 to rebuild a lost house completely, and its selling price is BRL 500,000. Therefore, the insurance value is calculated based only on the reconstruction value, in which the Basic Unit Cost is a good measure.

The CUB is the main indicator for civil construction, calculated monthly by the country’s industry unions. It determines the total cost of a job and is found by evaluating data such as material and labor prices.

This, of course, is for basic coverage only. The broader one brings extra protections to other risks, adding more value to the insurance cost. The calculation of the amount that the customer pays depends on the amount of the indemnity.

Read also: Assist card travel insurance

Life insurance

The calculation of life insurance occurs in the same way as any other. The higher the risk of a claim and the greater the indemnity value, the higher the insurance cost.

Therefore, parameters such as age, health history, routine habits, profession, gender, and even financial standard are considered in this case.

Then these data are put into a biometric table. This feature allows you to help accurately estimate each customer’s survival data and life expectancies based on the above information. However, these are just the basics. Some factors can increase the claim’s value, such as the practice of extreme sports or certain risky professions.

Also, you have your deciding factor in the insurance value. That is, you can choose the coverages you want to have. It is important to make this estimate before taking out insurance.

For example, you might want your family to have financial coverage for a few years after something happens to you. So, choose the covers that allow this. Then, you can arrive at the most accurate calculation of the insurance value, its characteristics, plus the coverages you would like to have.

Auto insurance

How is the insurance unit price calculated?

Auto insurance follows the same pattern as the previous ones. The calculation is made according to the insured’s profile and purchase coverage.

The insured’s profile does not contain only the information of the person who purchases the insurance. For example, the model of the vehicle is also a determining factor.

The higher its value, the more expensive the indemnity to be paid and, therefore, the higher the insurance price. In this case, each insurer has its compensation model according to its portfolio strategy. Therefore, an insurance broker is important to find the ideal insurance.

For example, if a certain car model ends up suffering many claims with an insurance company, it can be considered a high risk for the insurance company. In another, it may not. This is why there is considerable variation.

Another point to be considered is the area of ​​residence in which the vehicle is located. For example, large urban environments tend to have a higher crime rate, so areas with a greater chance of theft demand more expensive insurance.

As for the profile of the insured, there are some factors considered. Younger and inexperienced drivers are more likely to crash, so these prices tend to be slightly higher.

Already history can serve against or in favor. The greater the number of occurrences, the greater the risk factor. On the other hand, if the driver has a history of being a good driver, this can contribute to lowering the insurance price.

The insurance value is related to the risk of an accident occurring for a certain vehicle, in a certain area, with a certain type of driver. To calculate this risk, actuarial calculations are performed using statistical data, probability, and mathematical methods.

Therefore, they seek to obtain as much information as possible:

Car data: Car value, theft rate for a particular model, car style (sports models tend to run faster and therefore have a greater chance of collision, for example), among others.

Driver: Where you live and where you drive (associated with theft and accident rate by area), age (young people are more likely to crash their car), gender (women are more careful), driver history (How many points do you have? Do you have it in your wallet? Have you been involved in an accident recently?) among others.

Coverage: When you buy auto insurance, you select the insured capital, types of coverage and services. The greater the coverage, the greater the cost of insurance.

These are just a few examples. This is a complex process, which is why there is a great divergence in insurance value between insurers. Today, with the advancement of technology, access and availability of information is increasing, as are the factors involved in calculating insurance.

Finally, an obvious point is the use of the vehicle itself. The greater your use, the greater the insurance value.

Read also: Connected car insurance

How to find the best insurance value?

How is the insurance unit price calculated?

The examples above show how the calculation is done in the three most traditional types of insurance, but the formula is no exception. The value always starts from the sum of the insured’s risk profile plus the additional coverage that is contracted.

As it turned out, each insurer has a special set of rules for setting the price of insurance.

Contact the insurance brokerage, clear your situation and profile, and do simulations to find the value that best suits your budget.

What do you think? Do you have any questions about how the value of insurance works? Want to know the value of another, more specific insurance? So, contact us so we can clarify! And if you want to know more about insurance, continue on our blog!