Glossary

Premium

The amount you pay for an insurance policy over its term, built from the insurer's rate, your rating factors, coverage choices and discounts.

Also called: insurance premium, car insurance premium, insurance price

The premium is the price of your car insurance: the total you pay for one policy period, usually six or 12 months. You can pay it in full or in installments, often with a fee for monthly payments.

Insurers build a premium from a base insurance rate filed with the state, multiplied by your rating factors: driving record, claims history, experience and age where allowed, location, the vehicle, annual mileage and, where state law allows, a credit-based insurance score. Coverage choices change it too: higher limits cost more, and a higher deductible costs less. Then discounts are subtracted and any surcharges added. Example: a $500 base collision rate × 1.20 territory factor × 0.90 driver factor = $540, less a 10% multi-policy discount = $486 (hypothetical figures). Each coverage is priced this way and the results are added together.

Your premium can change at every renewal even if nothing about you does, because base rates move with claim costs in your state. A claim or ticket typically adds a surcharge for several years. To lower a premium, compare quotes, ask about discounts, raise deductibles you can afford, and review coverages you no longer need. See how car insurance rates are calculated.

Last reviewed October 4, 2026

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Related terms

Insurance rate The price per unit of coverage an insurer files with the state, which rating factors then adjust to produce your individual premium. Rating factors The characteristics insurers use to price a policy, such as driving record, location, vehicle, mileage and, where allowed, age and credit. Earned premium The share of a policy's premium that pays for the part of the term already past; the rest is unearned and refundable on cancellation. Surcharge An extra charge added to your premium after an at-fault accident, traffic violation or claim, usually lasting three to five years. Policy period The span of time a car insurance policy is in force, usually six or 12 months, from its effective date to its expiration date. Deductible The amount you pay toward a covered loss before your insurer pays the rest, set per claim for coverages like collision and comprehensive.

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Related tools

Pay in full vs monthly calculator Turn the extra cost of paying car insurance monthly — higher totals and installment fees — into an equivalent interest rate you can judge. Renewal rate increase checker See how much your car insurance renewal went up per year and per month, separate your own changes from a rate increase, and get a list of next steps.