A car insurance premium is the amount you pay your insurance provider on a regular basis in return for auto coverage. Your specific premium depends on a range of factors, which we at the Guides Auto Team will examine in this article. We’ve also researched the best car insurance companies to help you find the best match for your budget and coverage needs.
Car Insurance Premium Overview
Car insurance premiums are typically paid on a monthly or bimonthly basis in exchange for insurance coverage for your vehicle. Some customers choose to pay a larger premium every six months or every year. Many companies offer a paid-in-full car insurance discount for customers who pay an annual premium up front rather than in monthly installments.
Remember that your car insurance premium is separate from your insurance deductible. Your deductible is the amount you must pay out of pocket following a claim before your auto coverage takes effect. Choosing a higher deductible typically results in a lower auto insurance premium, while a lower deductible will lead to a higher premium.
How Do Insurance Providers Calculate Premiums?
Whatever the payment schedule, every insurance company has a slightly different method for calculating premiums. There are some common factors insurers use to determine how much you pay for coverage, including:
- Age: Teen drivers are more likely to be involved in accidents, so they pay higher rates than older drivers who have more experience behind the wheel.Marital status: Married drivers typically pay lower premiums than single drivers.
- Gender: Men tend to pay slightly higher insurance premiums than women.
- Location: Local risk factors like rates of accidents, thefts and break-ins have a significant impact on car insurance premiums.
- Credit score: In many states, insurers factor in your credit score when setting car insurance premiums. The better your score, the lower rates you’ll pay.
- Driving record: You’ll pay a lower premium if you’ve avoided accidents and other driving violations.
- Type of vehicle: Faster and newer cars come with higher insurance premiums.
The amount of coverage you purchase also has a large impact on how much you pay for auto insurance. If you only buy the liability coverage required by state law, you’ll pay less than if you purchase a full-coverage plan with comprehensive and collision insurance.
What Causes Insurance Premiums To Change?
Whether you buy a policy for a six- or 12-month term, your premium will stay the same for that time unless you add another vehicle or move to a new location. When your policy is up for renewal, your insurer will evaluate your premium amount and decide if it needs to change.
If you have a speeding ticket, at-fault accident or driving under the influence (DUI) violation, you can expect your car insurance premiums to increase. The graph below shows just how much common driving offenses can affect your premium cost:
Ways To Save on Car Insurance Premiums
Along with maintaining safe driving habits and avoiding the violations listed above, you can also bring your car insurance premium payment down by taking advantage of discount opportunities. These are a few of the most common discounts auto insurers offer:
- Safe driver: Some providers have a safe driver discount you earn simply by avoiding violations for a certain amount of time. Many also feature telematics insurance programs that track your driving behaviors through an app or plug-in device and reward you for safe habits.
- Multi-car: Having a multi-car or family insurance plan can result in lower premiums than insuring cars on their own policies.
- Vehicle safety: Adding anti-theft devices and other safety features can yield discounts on your insurance premiums.
- Good student: If you have a young driver on your policy, good grades can unlock insurance
- Bundling: Combining your auto coverage with other types of insurance, such as homeowners insurance, renters insurance or life insurance policies, can often lead to discounted rates.
What Is an Insurance Premium?: Conclusion
There are many factors that go into your car insurance premiums, from the types of coverage you purchase to personalized factors about you and your vehicle. You can also find plenty of ways to reduce your auto insurance costs. We recommend that you compare car insurance quotes from multiple providers and explore all discount opportunities to find the best match for your car insurance needs.
Top Auto Insurance Recommendations
The following highly rated insurers are ideal places to begin your search for affordable and reliable auto coverage.
State Farm: Editor’s Choice
State Farm, the nation’s most popular car insurance provider, has been in business since 1922. The company holds an A++ financial strength rating from AM Best and also boasts an A+ rating from the Better Business Bureau (BBB). We named State Farm our Editor’s Choice due to its strong industry reputation and consistently affordable rates.
Read more: State Farm insurance review
Geico: Affordable for Most Drivers
Geico is the second-largest auto insurer in the U.S. Like State Farm, it also has an A++ financial strength rating from AM Best and an A+ from the BBB. Geico is known for competitive rates across all driver profiles and features higher coverage limits than you’ll typically find with other insurers. The company also offers mechanical breakdown insurance (MBI), which covers a wide range of key components and functions like an extended warranty.
Read more: Geico insurance review
What Is an Insurance Premium?: FAQ
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
- Cost (30% of total score): Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
- Coverage (30% of total score): Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
- Reputation (15% of total score): Our research team considered market share, ratings from industry experts and years in business when giving this score.
- Availability (10% of total score): Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
- Customer Experience (15% of total score): This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.
*Data accurate at time of publication.