Your car insurance premium is the amount you pay your insurance company on a regular basis, often every month or every six months, in exchange for insurance coverage. Once you’ve paid your premium, your insurer will pay for the coverages detailed in the insurance policy, such as liability and collision coverages.<\/p>
Every insurance company determines its rates differently, but your premium is usually based on details about you, the type of car you own and the coverages you select.<\/p>
A car insurance premium is the cost of your auto insurance policy and is sometimes called an\u00a0insurance rate. Your total premium amount may cover you for six months or a year, depending on the policy length options your company offers, but you can typically pay your premium quarterly or monthly rather than as a lump sum.<\/p>
The\u00a0national average premium\u00a0for a full coverage car insurance policy in 2023 is $2,014 per year, according to Bankrate\u2019s study of average rates from Quadrant Information Services. The minimum coverage average is $622 per year. <\/p>
An insurance premium is what keeps your policy in force. As long as you continue paying the auto insurance premiums on time and meet the terms of your policy, your\u00a0insurance company\u00a0ensures financial protection for you and your vehicle in the event of a covered loss. If you stop paying the premium, the insurer has the right to\u00a0cancel your policy\u00a0after a certain period. <\/p>
Once your car insurance company cancels your policy, your coverage terminates, which may leave you with a\u00a0lapse of coverage\u00a0if you don\u2019t secure other coverage beforehand.<\/p>
How often do you pay for car insurance? It depends. When it comes to payment plans, your company probably has several options. You can usually pay your premium in full or\u00a0in installments, usually monthly, quarterly or semi-annual, depending on the length of the policy term. You typically get the best rate on insurance when you pay in full and avoid installment and processing fees.<\/p>
There are a few things you might want to consider before choosing a payment plan. Although you may save money by paying your premium in full, you may want to consider installments if this lump sum will cause you financial hardship. <\/p>
Most companies will allow you to change your payment plan in the middle of your policy term, too. Perhaps you\u2019d like to start your policy on a monthly payment plan, but later on, find that paying in full makes more sense. If you have specific questions regarding your payment plan options, you may find it helpful to contact your insurance agent.<\/p>
An insurance premium is the amount of money an individual or business pays for an insurance policy. Insurance premiums are paid for policies that cover healthcare, auto, home, and life insurance. Once earned, the premium is\u00a0income for\u00a0the insurance company. It also represents a liability, as the insurer must provide coverage for claims being made against the policy. <\/p>
Failure to pay the premium on the individual or the business may result in the cancellation of the policy.<\/p>
When you sign up for an\u00a0insurance policy, your insurer will charge you a premium. This is the amount you pay for the policy. Policyholders may\u00a0choose from\u00a0several options for\u00a0paying their\u00a0insurance premiums. Some insurers allow the policyholder to pay the insurance premium in installments\u2014monthly or semi-annually\u2014while others may require an upfront payment in full before any coverage starts.<\/p>
The price\u00a0of the premium\u00a0depends\u00a0on a variety of factors, including:<\/p>
Car insurance premiums are highly personalized. There are a number of factors that providers use to calculate your unique rate, and these vary based on state laws. Some of these factors you can control, and others you cannot. <\/p>
Here are some of the things that impact your car insurance premium:<\/p>
Your driving record is one of the biggest factors determining your car insurance premium. A driving record includes your history of at-fault car accidents and moving traffic violations, such as speeding tickets.<\/p>
Drivers with recent at-fault accidents and major traffic violations will pay more for coverage than good drivers. When setting car insurance rates, your insurer usually reviews the last three to five years of your driving record, depending on your state.<\/p>
Expect your\u00a0car insurance rates will go up after a speeding ticket. A driver with a speeding ticket pays 24% more, or about $380 per year, compared to a driver with a clean driving record, according to a Forbes Advisor analysis.<\/p>
You can also expect\u00a0car insurance rates to increase after an accident\u00a0if you are at fault. The average increase for accidents with property damage is 45%, and 47% for accidents that result in injuries, according to a Forbes Advisor analysis.<\/p>
The coverage you choose is also a major factor in deciding car insurance rates. The\u00a0main types of car insurance\u00a0are liability, collision and comprehensive, and uninsured motorist coverage. Don\u2019t skimp on coverage that you need just to save money. That mistake could cost you in the long run.<\/p>
For example, your state\u2019s minimum\u00a0liability car insurance\u00a0requirement is likely, not sufficient. If you cause a car accident with multiple injuries, you could quickly exhaust the policy limit, which means you\u2019ll get stuck paying out of pocket for others\u2019 medical expenses and other bills. Generally, you want to buy enough liability insurance to cover\u00a0what you could lose in a lawsuit, such as your savings.<\/p>
A\u00a0car insurance deductible\u00a0is the amount of money deducted from an insurance check when you file a claim, such as a collision or comprehensive insurance claim. For example, if your vehicle repair estimate is $2,000 and you have a $500 deductible, you\u2019ll get an insurance check for $1,500.<\/p>
Generally, the higher your deductible, the less you pay in car insurance premiums. That\u2019s because your insurer will pay less if you file a claim.<\/p>
There is no car insurance deductible for liability claims made against you if you cause an accident.<\/p>
Your ZIP code is another important pricing factor. Drivers who live in cities usually pay more than drivers in the suburbs due to higher rates of car accidents, theft and vandalism. Your insurer also looks at your region\u2019s weather-related claims (such as hail).<\/p>
Other location-related factors include:<\/p>
Many car insurance companies look at your\u00a0credit-based insurance score\u00a0to help determine your rates in states where it\u2019s allowed. California, Hawaii, Massachusetts and Michigan ban the use of credit in setting car insurance prices.<\/p>
The make and model of your vehicle is another car insurance pricing factor. Your insurer looks at past claims from similar models to evaluate repair costs, payments made for comprehensive claims and theft rates.<\/p>
Young and inexperienced drivers will pay more for car insurance because they\u2019re more likely to get into a car accident. Car insurance rates for young drivers start to go down around age 25. You tend to enjoy the best rates in your 40s and 50s, but your rates begin to creep back up again around age 65.<\/p>
Car insurance companies also often look at non-driving factors when setting rates, such as:<\/p>
The use of non-driving factors for car insurance rates is controversial. Some consumer advocacy groups have raised concerns that this practice is inherently discriminatory.<\/p>
Nationally, the average cost for \u201cfull coverage car insurance\u201d is $1,569 per year. This is according to a Forbes Advisor analysis of car insurance rates among large insurance companies. Your costs will vary depending on what type of coverage you choose and other cost factors.<\/p>
You typically have the option to pay your car insurance premium in monthly installments, bi-annually or annually, depending on your insurance company.<\/p>
Most car insurance companies offer a pay-in-full discount. Pay-in-full discounts can often range from 6% to 14%, according to a Forbes Advisor analysis.<\/p>
You can typically pay a car insurance premium by credit card, debit card, checking account or savings account. Your insurer might offer the following payment options:<\/p>
If you pay your car insurance premium in installments and have your payment automatically withdrawn, you can usually get an electronic funds transfer (EFT) discount between 3% and 6%.<\/p>
If you do not pay your car insurance premium, your policy will eventually be canceled for non-payment.<\/p>
Your auto insurer is typically required to send you notice by mail or email before canceling your policy, depending on your state. You usually have between 10 to 20 days to make a late payment, depending on your state.<\/p>
If your policy is canceled, you have an insurance lapse, which can cost you even more money when you buy another policy. And if you get\u00a0caught driving without car insurance, you could face steep financial and legal consequences.<\/p>
If you can\u2019t afford to make a car insurance payment, contact your insurer as soon as possible. Your insurer may be willing to extend the grace period or set up a payment plan.<\/p>
Here are some steps you can take to reduce your car insurance premium.<\/p>
On average,\u00a0USAA auto insurance\u00a0has the cheapest car insurance, according to a Forbes Advisor analysis of the best\u00a0cheap car insurance\u00a0companies. But USAA auto insurance is only available to active members of the military, veterans and their families.<\/p>
If you don\u2019t qualify for USAA, our analysis found that Geico, State Farm, Erie and Travelers offer competitive rates based on nationwide averages. It\u2019s a good idea to also get quotes from other insurance companies because the cheapest companies can vary depending on your state, driving record and other factors.<\/p>
A car insurance premium and a car insurance quote are not the same. Here\u2019s the main difference:<\/p>
Your car insurance premium may be higher than what you were originally quoted online. An insurance company bases your quote on the information that you provide, but the final premium could vary for several reasons, such as:<\/p>
Here\u2019s the key difference between a car insurance premium and a deductible<\/p>
Your car insurance premium could go up when your policy is renewed. Here are some common reasons you might see an increase:<\/p>
Not all car accidents increase your car insurance premium. For example, if your car was hit while parked or you were rear-ended at a red light, you won\u2019t get hit with a rate increase.<\/p>
Although car insurance can be expensive, there are many ways that you may be able to lower your rate. Here are some potential options for getting a\u00a0cheaper car insurance\u00a0premium:<\/p>
Since the price of car insurance varies by insurer and each company has its own proprietary rating algorithm, your premium may vary greatly depending on the company you choose. To find the cheapest company for your specific circumstances, you may want to\u00a0compare quotes\u00a0across various carriers. <\/p>
Most insurance professionals recommend comparing quotes for the same coverage types and limits across carriers to get the most accurate comparison.<\/p>
Almost every insurance company offers discounts that might lower your premium. Some discounts are more significant than others. You may want to review the discounts each carrier offers when comparing quotes.\u00a0Discounts\u00a0are commonly available for being a good student, remaining claims-free, driving a car with strong safety ratings and\u00a0bundling your insurance policies. <\/p>
You may also qualify for a discount if you pay your premium in full, enroll in paperless billing or set up autopay.<\/p>
There are many different\u00a0types of car insurance coverage, and the more you have, the higher your insurance premium typically is. Higher coverage limits also typically increase your premium. If price is a concern, you may want to review your policy to ensure you\u2019re only paying for the\u00a0coverage types that you need\u00a0and check for duplicate coverage. <\/p>
For instance, you might already have roadside assistance through your credit card provider.<\/p>