A Complete Guide to Auto Insurance Premium


Triston Martin

Nov 26, 2023

Your auto insurance premiumis the amount you pay to your insurance company regularly, usually every month or every six months, in exchange for insurance coverage. After you have paid your premium, your insurance company will pay for the coverages specified in your policy. This includes collision and liability coverage. Each insurance company sets its rates differently. However, your premium will be determined based on information about you, such as the type of car you drive and the coverages you choose.

What Does It Take to Get Car Insurance Premiums?

Your premium is the amount you pay an insurance company for vehicle insurance. Depending on the payment options offered by your car insurancecompany, your premium for car insurance may be paid monthly or every six months. Your insurance provider will provide the coverage outlined in your policy in exchange for your auto premium.

The type of coverage you select will affect how much your car insurance premiums cost. However, other factors may also impact your total cost. Except for New Hampshire, every state requires that you have at least a certain amount of coverage. This will help you protect your pocketbook by covering all costs up to the coverage limit you select -- such as covering any injuries or property damage you cause to another driver during an accident. Your car insurance premium and deductible are two different things. Your insurance deductible is the amount you pay out-of-pocket on a claim approved before your insurance kicks in.

What Is the Cost of Car Insurance?

The cost of car insurance varies for each driver depending on where they live, what insurance company they choose, and what coverage they have. It is important to understand what the average driver pays when trying to save money on your car insurance. Based on the most recent figures from the National Association of Insurance Commissioners, the average person spent $1190 on car insurance in 2018.

The NAIC data shows that car insurance premiums increased by 30% between 2014 and 2018, although insured vehicles have increased by 7%. AAA data shows that the average cost for car insurance for new vehicles in 2020 will be $1,202 per year. These numbers are quite close together. This means that auto insurance premiummay be an expense you need to add $100 per month to your monthly budget when purchasing a car.

How Does a Car Insurance Premium Be Determined?

Insurance companies use their formulas to calculate insurance premiums. Your car insurance premium is highly personal and is usually based on:

·Your Record as A Driver

Car insurance premiums are influenced by speeding tickets and at-fault accidents. The fewer incidents you have, the lower your rates. One exception? Drivers who are new to the driving profession. Your car insurance premium will be higher because you don't have a driving record.

·Your Demographics and Age

Senior drivers and teenagers are more at risk than those who drive, so they pay higher car insurance premiums. Your premium will also be affected by where you live. A densely populated area can lead to higher rates of theft and collisions. This could lead to higher insurance rates, particularly if you have comprehensive or collision coverage.

·Your Car Itself

Your auto insurance premium may be higher if you have expensive cars. This is assuming that you have collision and comprehensive coverage. Your premium can be reduced by using safety technology and anti-theft security measures.

·Your Car's Mileage

When setting rates, many insurance companies consider how often you drive. You could be charged a higher premium if you drive for a long time or are a frequent driver.

·Your Coverage and Your Deductible

Your car insurance premium will go up if you have more coverage. The higher your coverage limits, you will pay more. Your rate will also be affected by the deductible you choose. A lower deductible means a higher rate, while a high deductible means a low rate.

How To Pay Your Car Insurance Premium

Depending on the provider you choose, the method of paying your car insurance premium will vary. However, most car insurance companies offer the following options:

  • By mailing in a cheque

  • Online via the website of the insurer

  • Online via the smartphone app of the insurer

  • Autopay can be set up to send payments automatically

Online payments allow you to enter your credit card or debit card information or link your checking account for funds transfers. You can access your insurance and checking account using the same login information if your vehicle is insured through a bank service provider like USAA or State Farm.

While most insurers require you to pay your premium six- or twelve months in advance, many offer monthly payment plans. Most insurers allow you to set up automatic payments to draft money from your bank account every month automatically. This ensures you don't miss a payment. If you pay all of your annual premium in full upfront or enroll in autopay, you might qualify for a premium discount.

How Can You Lower Your Car Insurance Premiums?

Here are some ways to lower your car insurance premiums.

  • You may be able to lower your insurance costs by reducing unnecessary coverage, increasing your deductible, or reducing your coverage limits. These options can be discussed with your agent.

  • Some states allow younger drivers to take driver safety classes like Steer Clear(r), lowering your premium. It doesn't hurt, and it might even help.

  • Check with your insurance companyto find out if they offer a telematics program like Drive Safe &' Save(tm), State Farm. These usage-based car insurance plans track your driving habits and help you determine your premium. Your car insurance premium may be lower the less you drive.

  • Other common discounts include those for students, children who no longer drive while at college, insurance on multiple vehicles, anti-theft devices, defensive driving courses, and accident-free driving. For a complete list of discounts, contact your agent.

  • You can reduce your overall costs by using one insurance company to cover multiple insurance policies. Bundling is a way to save money by purchasing an auto policy and a home insurance policy.

  • Ask your insurance company if they offer a discount for paying the six-month term in advance. You may also save money by having your monthly payments automatically taken out, but make sure you check with your bank or credit card company to see any fees.


Your auto insurance premiumis determined by several factors, including your driving record, the type of vehicle you drive, and the state in which you live. Typically, people with good driving records will pay lower premiums than those with a poor driving history or at-fault accidents; if you're concerned about the rising insurance costs, the above-described ways to reduce your costs. These tips can help you save money on your auto insurance premium.


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