A premium is an upfront payment for insurance cover. It represents a calculation based on the exposure or risk you have added to the system.

The more valuable the item is, the consumer should pay, the more premium to add the risk to the system as it will ultimately cost the system more to replace or repair the item.

This is generally split into 2 aspects.
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a) The frequency in which the item is used, and hence claims are expected
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​For example, mobile phones are used more often (daily use) than cameras (weekly use). This increases the risk of damage or theft and results in a higher premium. 

b) The severity of a claim when something goes wrong.

For example, if someone crashes their drone, the odds are high that the entire item will be completely destroyed. When someone drops a camera, it is likely that the entire item will not be destroyed but can be repaired. Hence, the camera should attract a lower premium. 

Electronics are also more fragile than tables, for example, and attract a higher premium as they are more likely to be damaged.

When determining the premium, we also take a look at the environment. 

a) Who is the owner?

If the owner has had claims in the last few years, the odds of the owner having claims are higher, and the item attracts a higher premium.
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b) Where is the owner based?

If the owner resides in an area with high crime rates, the item is much more likely to be stolen and should attract a higher premium.

c) For what purposes is the item used?

If the item is used for commercial purposes, it will be used a lot more than if someone uses it as a hobby. This should attract a higher premium as the odds of damage or theft will be higher.