By: Eric Rosenberg

When you have an insurance policy, you likely pay a monthly, quarterly or annual fee for your insurance protections. That regular charge is called an insurance premium. You often pay premiums for health insurance, auto insurance and, perhaps, additional insurance such as life, homeowners or renters insurance.

As a general rule, insurance companies charge a premium based on the risk of paying out a claim. If you are relatively low risk, you may get a lower premium. Riskier insurance customers typically wind up with higher premium rates.

If you are wondering why your insurance premiums are going up, read on to learn how your insurance premiums come together and what you can do to avoid seeing an increase.

5 Top Reasons for Insurance Premiums to Rise

• History of claims: One of the fastest ways to get higher insurance rates is to file many claims. When insurance companies see that an insured files claims regularly, they may increase rates to make up for higher expected future costs.
• Accidents and tickets: Moving violations and accidents where you were at fault are a common source of increased insurance premiums for auto policyholders.
• Worsening credit: Did you know your credit score factors into your insurance rates? Keeping credit balances low and paying on time can improve your score and help you qualify for lower premiums. Worsening credit can lead to a rate increase.
• Insurance fraud: Fraud is a huge cost for all insurance customers. According to the National Insurance Crime Bureau, an estimated 10 percent of property and casualty insurance claims may be fraud. Every fraudulent claim increases costs for all.
• Higher insurance value: If you are paying to insure a home that has increased in value, it makes sense that your premiums may also increase. If you increase the coverage on your home from $250,000 to $300,000, for example, your rates would likely experience a modest increase, as well.
• Bonus reason—inflation: Something completely out of your control, unless you are a member of the Federal Reserve Board of Governors, is inflation. Inflation is a natural economic process where dollars become worth a little less over time. Inflation may lead to higher insurance premiums, but it also causes prices to go up at the grocery store, gas station and just about anywhere else you go shopping.

How to Calculate Insurance Premiums

Every insurance company uses its own proprietary formula to calculate insurance premiums. The underwriters who do the math use non-public calculations to decide what customers will pay, but these are some of the most common inputs:

• Type of coverage: The type of coverage you choose is one of the biggest factors in insurance premium calculations. Rates will be very different for auto, home, life and other types of insurance coverage.
• Coverage level: You can usually choose between bare minimum coverage or very extensive coverage. You'll typically pay less for lower coverage, but you'll also have a lower benefit if you do file a claim. It's often worth paying a bit more in premiums for higher coverage levels depending on your finances, goals and insurance needs.
• Personal factors: Your age, health and credit score are all commonly used to calculate insurance premiums. Depending on the type of insurance, your family's health history, type of job and hobbies may come into play. For some kinds of insurance, you may even get a discount for being married.
• Location: When you live in an area with very few claims, you may get lower rates. Other location factors, like access to a garage versus street parking and nearby fire hydrants, can also influence your rates.

How to Lower Your Insurance Premiums

In most cases, there is no magic action you can take that will instantly drop your insurance premiums. However, you can take a long-term view of your insurance premiums and take steps to manage your risk in the best way possible.

Do your best to drive safely, take care of your health, keep your home well maintained and avoid unnecessary insurance claims. If you live a low-risk lifestyle, you should qualify for lower-cost, lower-risk premiums. That's a big win for your money.