Whether it be visitor medical insurance, student insurance, or immigrant insurance, the principles of insurance remain the same. Many people are puzzled as to why their insurance premium is higher than their neighbors’. Insurance follows certain basic principles, and all the variables you see—the deductible, the premium, the co-pay—are related, and affect each other.

Insurance works on a basic principle—the spreading of risk over large numbers. So, in effect, when 100 people purchase international travel insurance for $100 each, the insurance company receives $10,000, which is then used to settle the claims of those who are exposed to the risk (say, a medical illness).

For plan holders, it is the price to ensure that any extra expenses arising out of illness during the trip are taken care of. The premium is usually dependent on the probability that the plan holder will make a claim.

There are several factors that are used to determine the actual risk that an applicant poses to the insurance company (a “risk” is related to the likelihood of a person making a claim). In terms of medical insurance, the most important factor to take into account is the age of a person. Obviously, the older a person is, the more likely he/she is to fall ill and make a claim. It is good to know how insurance works, so that you can be better educated when it comes to purchasing a plan.