What is a car insurance premium?

Car insurance premiums are the rates that you pay regularly to maintain coverage. Auto insurance premiums can are typically paid monthly, but can be paid semi-annually or annually for an additional discount. The average car insurance rates for full coverage in the US are $79.58/mo. Car insurance premium calculators may help you estimate your coverage. Use our FREE tool below.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jul 23, 2020

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Here's what you need to know...

  • The premium is the rate that you will pay to the insurance company for your auto insurance coverage
  • You can shop around for quotes from different insurance companies to make sure that you are paying a low premium
  • While saving money on your premium is important, you should also make sure that you are working with a reputable insurance policy so that you will not have any surprises if you have to file a claim

The amount that you will pay for auto insurance, or your premium, will depend on many factors and will vary across insurance companies.

Along with your driving record, where you live and the type of car you drive can affect your premium.

There are ways to qualify for discounts to make sure your premium is as low as possible.

Enter your zip code above now to find car insurance rates that work with your budget!

What affects the rates you pay for car insurance?

The premium is the amount you will pay for auto insurance coverage. When considering whether to purchase an auto insurance policy, you can shop around for different quotes on the premium that you will pay for the policy.

According to the Insurance Information Institute, the average annual auto insurance premium in the U.S. is about $800.

However, there are many factors that can influence the price you pay for auto insurance, so it is not very helpful to assume that you will pay in the average range.

There is no set formula for determining your auto insurance premium across all auto insurance companies.

This is why it is important to shop around before committing to a quote because you may fare better at one company over another.

These are some of the things that could affect how much you pay for auto insurance.

Driving Record

Having a long history of accidents or serious traffic violations could mean that you will pay more than a driver with a clean record when it comes to auto insurance premiums.

New drivers without much of a driving record are also likely to pay higher auto insurance premiums.

Your Location

If you live and park your car in a city with higher crime rates, then you may pay more for auto insurance. This is because the risk of vandalism or theft of your car is higher.

Your Age and Gender

If you are a young driver under the age of 25, you will likely pay more for auto insurance than a more experienced driver. In addition, women statistically have fewer accidents and serious traffic violations than men on average in the U.S., so they tend to have lower auto insurance rates.

The Car You Buy

If you purchase a car that is likely to be stolen, such as a flash sports car, then it is possible that you will pay a higher auto insurance premium.

In addition, if you buy a car that comes with many highly-rated safety features, you could pay less for auto insurance.

If you are considering buying a new car, you should speak with an auto insurance agent about the effect that the new car will have on your auto insurance premium.

You may also get a discount by adding the new car to an existing policy through multi-car discounts.

– Your Credit Score

Having a good credit score and history is a good predictor of the likelihood of that driver filing a claim. If you have a solid history of paying your bills on time and do not have any bankruptcies on your credit report, then you may pay a lower auto insurance premium.

– Your Coverage

Even though almost every state requires auto insurance coverage, many drivers carry more coverage than just the state minimum.

This is because you would likely have to pay out of pocket in the event of an accident if you only have the state minimum coverage.

The recommended amount of coverage you should carry is about 10 times the average state insurance minimum.

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Ways to Reduce Car Insurance Rates


If you are looking for ways to get your premium as low as possible, consider the following options.

  • Increase your deductible. The higher your deductible, the more you will have to pay out of pocket for a claim, but the lower your premium will be.
  • As your car gets older, consider reducing the coverage for collision and comprehensive insurance because the value of your car may not be high enough to justify the cost of insuring it for a total loss.
  • Ask your insurance agent about discounts. If you are in the military or have certain occupations, you may be able to get a reduced rate on auto insurance.

It is understandable that you everyone wants to pay the lowest premium possible for car insurance.

However, keep in mind when shopping around for auto insurance quotes, there are many other considerations other than just cost when choosing an auto insurance company.

In the event that you have to file a claim through your auto insurance, you will want to work with a company that has a good reputation for customer service and for processing claims efficiently.

Ask around among friends and family members about their experience with their insurance company. It is important to do your homework before simply accepting the lowest auto insurance quote you are offered.

The Bottom Line on Car Insurance Premiums

Auto insurance premiums for auto insurance coverage depend on many factors and can vary across different insurance companies.

When trying to keep the cost of auto insurance as low as possible, be sure to inquire as to discounts that may apply to you and to periodically request quotes from other companies to see if you could maintain the same auto insurance coverage for less.

Enter your zip code below for car insurance rates from multiple companies in your area!

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Enter your ZIP code below to view companies that have cheap car insurance rates.

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