The pure rate is the main component of property insurance rates and is determined by the probability of loss.
The premium rate is the basis on which the insurance company collects premiums, and is the ratio of the premium that should be paid to the sum insured. Generally, insurance rates are divided into two parts, the pure rate and the additional rate. Property insurance rate is also composed of pure rate and surcharge rate, the higher the insured amount of property insurance, the larger the insurance rate, and they are directly proportional to each other.
People are accustomed to the pure rate and the sum of the surcharge rate called the gross rate, the pure rate is the main component of the property insurance rate, is determined by the probability of loss. As a secondary component of the insurance rate, the surcharge rate is calculated on the basis of the insurance company's operating expenses. In setting rates, insurance companies follow the principle of equal power and equal duty, and they determine insurance rates generally by practicing the three methods of observation, classification and increase.
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