Search
Search & Choose State
Compare Rates & Save

Enter Zip Code:


  • Auto Insurance Premium

    Auto Insurance Premium

    An auto insurance premium is the total cost of maintaining your car insurance policy.

    From the type of car you drive to your age and gender, car insurance companies use a variety of factors when determining your premium amount. 

    What Is a Car Insurance Premium?

    Your premium is the payment you make on a regular basis to keep your auto insurance coverage active.

    How Often Do You Pay?

    How often you pay your premium—or have the option to pay—depends on your provider. For example, some drivers pay monthly premiums and others pay in larger chunks, such as every 3 or 6 months.

    In some cases, you might get a discount from your insurance company for paying your full premium upfront. 

    How Are Insurance Premiums Calculated?

    First and foremost, insurance companies use the following to determine your premium:

    • The type(s) of coverage you want.
    • The amount of coverage you want (i.e., your limits).

    Other factors car insurance companies use when calculating your insurance premiums include:

    • Your motor vehicle record (or driving record).
      • This document lets car insurance companies know information about your driving history, including:
        • Your current driver’s license status.
        • At-fault accidents.
        • Whether you’ve been convicted of serious traffic violations.
    • Your vehicle, including where you park it.
      • Car insurance companies look at factors such as how “at risk” the car is for being vandalized or stolen, as well as how much repairs would cost.
      • Likewise, where you park your car—specifically, how safe that location is—plays a role in calculating insurance premiums.
    • Your location.
      • Drivers in urban areas (especially those with high crime rates) tend to pay higher premiums than those in rural areas.
    • How often you use your vehicle.
      • If you don’t drive a lot, you might get lower rates than someone who makes a hefty commute to work each day.
    • Your credit score.
      • Some car insurance companies determine how likely you are to file a claim based on your credit history.
        • NOTE: Depending on your state, it may be illegal for your insurance company to consider your credit score.
    • Your personal information, such as your age and gender.
      • Typically, “mature drivers” (generally 25 and older) receive lower insurance premiums, as do females because—as a group—they tend to be involved in fewer serious accidents.

    Although many auto insurance companies use these factors, it’s still important to shop around for coverage. Get car insurance quotes before choosing the best coverage for your vehicle.

    The Impact of Deductibles

    Your car insurance deductible is the out-of-pocket amount of money you must pay before your car insurance kicks in, so to speak.

    Example:

    If you have $5,000 worth of damage to your vehicle and your deductible is $1,000:

    • YOU pay $1,000 toward the damage repair.
    • Your insurance company picks up the remaining $4,000.

    How Do Deductibles Affect Premiums?

    Generally, the higher your premium, the lower your deductible; likewise, the higher your deductible, the lower your premium.

    Be careful when choosing your insurance deductible. Choosing a higher deductible and getting a lower premium may seem like a great money-saving idea, but the reality is that you may have to pay that deductible some day.

    Choose a deductible you can afford in the event an accident—of any sort—occurs. 

    Premium Payment Methods

    Car insurance payment methods vary by provider, but some of the most common payment methods include:

    • Paying in person at your local car insurance agent’s office.
    • Mailing a check.
    • Signing up for direct withdrawal/Automated Clearing House (ACH).
    • Paying online using the insurance company’s website.
    • Making payments via mobile apps.
    • Paying by phone (which generally includes providing a debit or credit card number or check information).

    Because penalties for nonpayment can be steep (see “Penalties for Nonpayment of Premiums” below), take some time to think about the quickest and most convenient method of payment for you.

    Penalties for Nonpayment of Premiums

    Again, this depends on your specific car insurance company and/or the state you reside in, but some of the most common penalties for nonpayment of premiums include:

    • Policy cancellation, meaning your car insurance company outright cancels your policy.
    • Increased premiums, meaning your premium could go up in the future.

    You may also have a coverage lapse, or a period where you have no car insurance.

    Each of these situations can lead to car insurance companies labeling you a “high-risk driver” which is just another reason you could receive higher premium quotes; worse yet, it could mean being turned down for coverage altogether.

    Also, some states require car insurance companies to notify the state’s driver’s license or motor vehicle agency when there’s a policy cancellation. If this happens and you can’t prove you have coverage, you could face penalties such as fines and even license suspension.

    Ideally, it’s best to pay your premiums on time, every time, but if there’s any risk you might be late, contact your auto insurance provider immediately for payment options. Your provider might offer a grace period.