What Is a Car Insurance Premium?

A car insurance premium is the price you pay for car insurance.
Ryan Brady
By Ryan Brady 
Edited by Lacie Glover

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

If you've ever had to buy car insurance (or any insurance for that matter), you've likely come across the term premium somewhere along your journey.

Don't let this fancy word confuse you. 

A premium is just another word insurance companies use for price. More specifically, it's the price you pay your insurer in exchange for coverage.

Car insurance premiums are typically expressed as one-month, six-month or yearly totals. While you can pay your policy's six-month or annual premium in one lump sum (and possibly receive an auto insurance discount), most companies allow you to pay your premium monthly.

Once you pay your first premium — or the total, if you opt to pay it entirely — you are officially covered by insurance. Just be sure to continue making on-time payments to remain insured and avoid a lapse in coverage, which could subsequently raise your premium. 

Take note: While a car insurance premium is the price you pay for your auto policy, it may not be your only cost. For example, if you get into an accident and file a claim, you may have to pay a deductible before receiving a payout. And if you don't have enough insurance, you might end up paying out of pocket for the remaining expenses after an accident.

What's the difference between a premium and a quote?

If you've ever shopped around for car insurance online or over the phone, chances are you were given a quote. A quote is simply an estimate of your policy's premium.

Your car insurance premium will likely differ from the estimated quote you were given initially. This occurs because insurance companies do not always ask for all of the information required when generating quotes. Instead, companies will do their due diligence before determining your eligibility and final price.

🤓Nerdy Tip

Insurance companies will ultimately catch anything you forget or fail to mention when filling out a quote form (such as that speeding ticket from three years ago). So be as accurate and truthful as possible to receive a more realistic quote.

Why is my car insurance premium so high?

Premiums in car insurance can vary dramatically from person to person — even if that person is your neighbor and drives the exact car you do. That's because auto insurers look at many different factors when coming up with a premium, such as:

  • Driver details. Age, gender, geographic location, marital status, driving record and credit score are some factors considered.

  • Car details. The make and model of the car, the accumulated miles, theft rates and safety features are some factors up for consideration.

  • Policy details. These factors include coverage types and limits, deductibles, claims history and previous gaps in coverage.

On top of that, auto insurers weigh each of these factors differently. So while you may have a low premium with one insurer, another may charge you more than double. That's why it's essential to shop around and get at least three quotes to ensure you're getting the best price.

For a more comprehensive list of factors that impact your car insurance premium and ways to lower it, check out our article on what affects car insurance rates.

Frequently asked questions

A quote is an estimate of the premium you’ll pay for your auto insurance policy based on the basic information you provide upfront. Because auto insurers typically do a deeper background check to determine final eligibility and price, your premium will likely differ from your quote. This is also true if you entered the wrong information on your quote form.

Common ways to lower your premium for car insurance and get cheap auto insurance include shopping around with different companies, paying your six-month or yearly premium upfront, asking about discounts, bundling policies and driving less.

To find your car insurance premium on an existing policy, call your company or agent or look for your car insurance declaration page — the one-to-two-page document summarizing your policy and the premium you’re paying.

Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.