What are car insurance premiums? (Guide 2022)

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There is a lot of information to learn when buying auto insurance. When researching providers and coverage, you may be wondering: what are car insurance premiums? The premium is the payment you make to your insurance company for your policy. In this guide, we’ll take a detailed look at what car insurance premiums are, how they’re calculated, and how you can reduce them.

Our team reviewed best car insurance companies in the industry, so we will also provide recommendations to compare when buying coverage.

What is a car insurance premium?

A car insurance premium is the amount you pay your car insurance company for your policy. Most insurers offer semi-annual or annual payment plans, but it is not uncommon for providers to offer three-month or one-month payment plans. If you don’t pay your premium, you risk losing your car insurance.

Car Insurance Quote Vs. Car Insurance Premium

A car insurance quote is an estimate of what a policy may cost you. A car insurance premium is the amount you pay to the car insurance company once you have purchased a policy. Premiums can usually be paid in full up front or split into installments.

Auto insurance quotes may differ from the actual cost of your premium. Many factors affect your quote calculation and information may change once you have purchased a policy. For example, some insurers won’t ask for your VIN during the quote process, but will instead use your vehicle’s make, model, and model year to determine a quote.

If you decide to get a policy from this provider, the company may ask for your VIN to give you a more accurate rate. And if you decide to add more coverage than what you selected for your quote, your premium will likely be higher than the estimate.

Will my auto insurance premium increase over time?

Insurance premiums generally change every six to 12 months, depending on the policy and provider. Although your insurance premiums are income for your insurer, they also contribute to a regional insurance pool used to settle claims. These funds are affected by the total number of claims in your area, as well as state insurance regulations.

So your premium could go up if there are more claims filed than usual or go down if your state legislature passes new insurance regulatory laws.

Your premium may also increase for the following reasons:

  • You recently filed a claim
  • You have a recent traffic violation on your driving record
  • You have changed vehicles or added a vehicle to your policy
  • You have added a driver to your policy
  • You have increased your coverage

In our recent survey of 1,000 car insurance customers, nearly 41% of respondents said their rates had gone up with no obvious cause.

How are auto insurance premiums calculated?

Many factors affect auto insurance rates. Because these factors differ from person to person, there is no standard insurance cost that applies to every driver.

The table below explains what insurers take into account when determining your car insurance premium:

How to pay a car insurance premium

How you pay your premium will depend on the insurer. Car insurance companies generally offer a variety of ways to pay your car insurance premium. These include:

  • A check mailed
  • An online portal on an insurer’s website
  • The mobile application of an insurer
  • Automatic payments from your bank account

If you choose to pay online, you will typically need to enter your credit card information for each transaction or link a bank account.

Some insurers require you to pay your premium every six or 12 months, but most offer monthly payment plans. These can be set up to be automatically withdrawn from your account via the provider’s website or your bank. Some insurers offer a full payment discount if you pay the annual premium all at once.

How much does a car insurance premium cost?

To give you an idea of ​​the average cost of an auto insurance premium, our team looked at full coverage rate estimates from 10 of the nation’s largest auto insurance companies. We have found that the annual premiums of these insurers vary from approximately $1,100 to $2,100 and monthly premiums range from approximately $90 to $180.

These averages are for 35-year-old married drivers with good credit and a clean driving record. Keep in mind that car insurance premiums take into account your personal data, so your rates will be different.

How to lower your auto insurance premium

If you’re looking to lower your insurance premium, consider these strategies:

  • Compare rates: When you shop for car insurance, compare the quotes of several providers. One insurer can provide the coverage you need for much less than another.
  • Look for discounts: Providers usually offer a range of car insurance discounts, so check your provider’s website or contact an insurance agent to find out how to save.
  • Bundle your insurance policies: Many insurers offer discounts for bundling your car insurance with your home or tenant insurance.
  • Pay in full: Most insurers offer a discount for the initial payment of your annual premium.
  • Pull down the cover you don’t need: The less coverage you have, the lower your insurance premium will be. If you have an older vehicle or your annual premium exceeds 10% of your car’s value, comprehensive and collision coverage may not be worth it.
  • Take a road safety course: Find out if your insurer offers a discount for completing a state-approved driver safety program. These classes are usually only six to eight hours long, and taking one can help lower your premium.
  • Enroll in a usage-based program: Many major providers offer discounts for using mobile devices or apps that monitor mileage or driving habits like speeding and hard braking. But if you don’t drive carefully, you could raise your rates.

Recommendations for car insurance

Compare car insurance Quotes are an important step in finding the right coverage, but it’s also important to look into an insurer’s reputation. Our team researched the best insurance companies on the market. We recommend adding State Farm and Geico to your search.

State Farm: Best Overall Supplier

State Farm is the nation’s largest insurance provider and is known for its reliable and affordable coverage. The company holds a Financial strength rating A++ from AM Best as well as a A+ rating from the Better Business Bureau (BBB). State Farm is an especially good choice for young drivers, as it offers discounts to good students and allows for road safety courses.

Read more: State Farm Insurance Review

Geico: Best for Discounts

Geico is one of the most reputable insurers in the market and the second largest insurer in the United States. The company holds a A+ rating BBB and a Financial strength rating A++ by AM Best. Geico offers some of the lowest rates in the industry and a wide variety of discount opportunities, so if you’re looking cheap car insuranceGeico may be the choice for you.

Read more: Geico Insurance Review

How we rate insurers

Our review process aims to provide consistent and unbiased ratings of car insurance providers. While there are multiple qualities that make a successful auto insurance company, our review team focuses on the ones we believe are most important to consumers:

  • Cost: The cost can be difficult to compare between insurers because many factors affect annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we review insurance rate estimates generated by Quadrant Information Services, rebate opportunities, and consumer reports.
  • Cover: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits such as roadside assistance.
  • Reliability: It is important for an automobile insurer to be able to meet its claims obligations. Companies whose financial strength is rated by AM Best achieve the best results in this category. Established insurers with a long history of reliable service also receive positive ratings.
  • Service: We scour customer reviews on sites like the Better Business Bureau (BBB) ​​to learn more about customer experiences. Insurers with low complaint volumes perform well in this area. We also take the claims process into account, giving higher ratings to auto insurers that offer easy-to-use claims apps.

*Data correct at time of publication.

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