What is Average Fixed Rate Insurance? In insurance, the average fixed rate is the variable costs of production divided by the amount of output created. Variable costs are those expenses that have to be charged at variable amount irrespective of the level of production produced. It is an insurance policy that gives maximum cover at minimum expense. There are many benefits of this type of policy, which makes it one of the best types of insurance available.
The first benefit of what is average fixed rate is that it takes into account all the necessary factors for determining the premium and the total cost of insurance. All the relevant information such as mortality, age, gender, location, amount of cover, etc is considered in the premium calculation. Hence the final figure m9.2 is the figure that gives the maximum cover at minimum cost. The rate varies with the location and industry because certain risks are unique to certain areas. It also depends upon the size of the business i.e. the number of employees.
The second benefit of what is average fixed costs is that it takes into account all the expenses that are unique to each insured product or service. These include the indirect expenses like sales tax, property taxes, property insurance, payroll expenses etc. which are included in the cost of production and are not reflected in the premiums. This allows the insured to price his products or services competitively.
Thirdly, what is average fixed cost also takes into account the level of profits. This can be done by dividing the total cost of production by the profits made. Then calculate the percentage of profit left by the insurer and compare it with the expenses per sale percentage stated in your policy document.
Fourthly, what is average fixed cost also takes into account the number of units produced, number of units sold etc. All these add up to give the final figure of your fixed costs. Add the total number of units produced to the total production and this gives you the figure which is called production cost or price of goods per unit.
Fifthly, what is average fixed cost also takes into account the number of units bought over a period of one year. This will give an idea of what is average in terms of fixed costs per annum. When this is compared to what is called annual fixed costs, the result is a clearer picture of what is average and what are the minimum and maximum amounts of premium paid per annum. This will allow you to plan your premiums in such a way that you can pay as little as possible for a given level of cover and still have sufficient cash left to cover any expenses that may arise in the future. The idea here is that you should always have enough money to pay the total amount of your premium even if there are some months left of the year when your premium did not pay out.
So, what is average fixed cost? It is simply the amount of money paid per annum on premiums in return for an agreed level of cover. This is normally done on an annual basis but there are some policies where it is done on a monthly basis too. The main factor here is the idea that you are looking at the total amount of what is called expenses in buying and producing the goods per annum, both active and passive. This includes expenses such as labour, raw materials, production, promotion, sale, finance, warranty, installation and so on.
To calculate what is the average fixed cost, you need to know what is the variable cost. Variable cost means different costs other than what is average fixed cost. For example, you might have expenses on shipping and handling, taxes, salaries and so on. So, you would then need to take into account all these into your calculations in order to find out what your variable cost would be. This will give you the ability to calculate how much money you would need to set aside for your policy each year. And this is the best way to calculate what is the variable cost and what is the average fixed cost so that you can choose the right type of policy for your business.