What Is a Car Insurance Premium?
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Jeff Green has held a variety of sales and management roles at life insurance companies, Wall street firms, and distribution organizations over his 40-year career. He was previously Finra 7,24,66 registered and held life insurance licenses in multiple states. He is a graduate of Stony Brook University.
What Is a Car Insurance Premium?
Your car insurance premium is the amount of money that you pay your car insurance company on a regular basis to maintain coverage. The cost of your premiums can depend on many factors, including the type of car you have and what’s on your driving record. Your independent agent can help you get a no-obligation quote and find discounts you may qualify for.
How Is a Car Insurance Premium Calculated?
Your auto insurance premium is determined by your insurance company. The amount you pay can depend on a wide variety of factors, including but not limited to:
- Your geographic location
- Your age, gender, and other personal details
- The number of drivers on your policy
- Your vehicle’s type, make, model, and age
- The mileage on your vehicle
- The type(s) of insurance coverage you select
- The amount of your deductible
- Discounts offered by your insurance company
As you can see, you have control over several of these factors. Understanding how your choices may affect your premium can help you save money and get the right amount of coverage for your needs.
How Often Do You Pay an Insurance Premium?
Different car insurance companies may require you to pay your premium at different intervals. The most common payment cycles are every month, every six months, or once a year.
Some insurers may give you a choice between paying in monthly installments or paying your entire premium (for six months or a year) in one lump sum. You’ll typically get a discount if you pay in full.
Certain high-risk drivers (for example, drivers who’ve been involved in an uninsured car accident in the past) may be required to pay their full premium up-front.
What Is the Difference Between an Insurance Premium and an Insurance Quote?
These terms are sometimes used interchangeably, but it’s important to know the difference. A car insurance quote is an estimate of how much a policy might cost, based on the information you provide to an insurer. Your car insurance premium is the actual amount you agree to pay for your chosen policy. Your premium may differ from a quote because of discounts, fees, or additional details about your vehicle or driving history.
How Can You Save on Insurance Premiums?
Along with gas, repairs, and loan payments, car insurance is among the biggest expenses related to being a driver. The good news is that there are several ways to lower your premium. Here are five ways to make your insurance dollar go further:
- Check for discounts. Many insurers offer car insurance discounts for completing a driving safety course, installing an anti-theft system, or even getting good grades on your report card.
- Pay your premium in full. Insurance companies commonly offer a discount if you pay for your entire policy in one lump sum rather than in monthly installments.
- Increase your deductible. Often, if you agree to pay a larger out-of-pocket amount in the event of a covered loss, you can reduce the amount you have to pay upfront.
- Evaluate your coverage. Car insurance comes with many different options. Review your policy and make sure you’re only paying for the types of coverage you need.
- Bundle when possible. You may be able to get a discount if you combine your car insurance policy with homeowners, renters, or life insurance from the same company.
Above all, though, the best way to save money on car insurance over the long term is to be a safe driver, avoid traffic tickets, and ensure that your coverage doesn’t lapse.
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When Might Auto Insurance Premiums Increase?
Nearly all car insurance policies come in six-month or one-year terms, although some allow you to pay in monthly installments. Unless you make a change to your policy (like buying a new car), your premium should stay the same for the duration of that term. Once your term is up, your insurance company may recalculate your premium.
If you’ve driven safely all year or you took a defensive driving course, your premium could go down. If you got a speeding ticket or were involved in an accident, it could go up. Insurance companies may also fine-tune their formula for calculating premiums, so it’s possible for your new premium amount to be higher or lower without any changes to your driving record.
Frequently Asked Questions about Car Insurance Premiums
While car insurance rates can vary greatly depending on the vehicle, driver, and policy features, the average premium for full coverage is around $2,000 per year (which works out to about $1,000 every six months or $167 every month). The average premium for minimum coverage is around $600 per year ($300 every six months or $50 every month).
Six months is a common term length for car insurance. A six-month car insurance premium would be the amount of money you would pay your car insurance company to maintain coverage. It’s typically due in one lump sum at an agreed-upon date.
A car insurance premium is the amount you agree to pay your insurer for coverage under a particular policy. A car insurance deductible is an amount you are responsible for paying out of pocket in the event of an accident or other covered loss.
A car insurance quote is an estimate of how much a policy might cost. Your car insurance premium is the actual amount you agree to pay for your chosen policy.