Auto Insurance Premium Defined (2024)
The definition of an auto insurance premium is the amount drivers pay insurers for coverage. Auto insurance premiums average $119/mo but vary by policy type. Our guide will help you learn what insurance premiums are, how they work, whether you get a grace period, and tips for reducing car insurance premiums.
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Heidi Mertlich
Licensed Insurance Agent
Heidi works with top-rated insurance carriers to bring her clients the highest quality protection at the most competitive prices. She founded NoPhysicalTermLife.com, specializing in life insurance that doesn’t require a medical exam. Heidi is a regular contributor to several insurance websites, including FinanceBuzz.com, Insurist.com, Finance101.com, and Forbes. As a parent herself, she under...
Licensed Insurance Agent
UPDATED: Oct 3, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Oct 3, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Car insurance premiums can be paid monthly or in full every six months to a year
- Insurance companies look at multiple driver factors to calculate premiums
- Insurance premiums will increase if drivers get in accidents or receive traffic tickets
Auto insurance premiums, also known as insurance rates, are the monthly or semi-annual amounts you pay your insurance company for coverage. At the best auto insurance companies, several factors affect your insurance premium, from the car you drive to your coverage options.
You may also qualify for an insurance premium grace period if you need to make a late payment. Learn more about what to do if you can’t pay your auto insurance premium.
Our guide will help explain what insurance premiums are, how they get calculated, average premiums, and the difference between a deductible and a premium. Then, get started on reducing car insurance premiums by inserting your ZIP code into our free quote comparison tool above.
- Understanding Auto Insurance Premiums
- Does the age of a car affect auto insurance rates?
- How long does an accident stay on your record?
- Do non-driving-related factors affect auto insurance rates?
- Does a criminal record affect auto insurance rates?
- Does a job affect auto insurance rates?
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- Why is auto insurance for Texas teens so expensive?
- Does annual mileage affect auto insurance rates?
- Does owning a home affect auto insurance rates?
- Does having a pacemaker affect auto insurance rates?
- Does a suspended license affect auto insurance rates?
- Do I have to declare speeding points on my insurance?
- Does the price of a car affect auto insurance rates?
- Does someone hitting my car affect auto insurance rates?
- Does moving affect auto insurance rates?
- Does getting an auto insurance quote hurt your credit score?
- Does a speeding ticket affect auto insurance rates?
- Do insurance surcharges affect auto insurance rates?
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- Do points affect auto insurance rates?
- Does a repossession affect auto insurance rates?
- Save Money by Switching to PLPD Insurance (2024)
Auto Insurance Premium Definition
A car insurance premium is a monthly or semi-annual payment you make for coverage. It’s important to understand that insurers use several factors to calculate each driver’s risk.
The higher your risk of filing a claim, the higher the insurance company will set your premium.
The main factors insurance companies use to calculate premiums include:
- Car details: Insurance companies will look at your car’s value, safety features, how well it performs in a crash, and other relevant details.
- Coverages: The coverages you choose affects how much you pay for auto insurance. Insurance companies charge more for a full coverage policy than a minimum liability policy.
- Credit score: Insurance companies may use your credit score in some states for their rate calculations.
- Deductible: Insurance companies will raise or lower rates depending on your policy’s deductible amount. The difference between a deductible and a premium is that a deductible is what you pay before coverage kicks in, while a premium is your auto insurance cost.
- Discounts: Insurance companies will check for eligible discounts and charge accordingly.
- Driver details: Age and gender are factors used to calculate risk unless your state outlaws the use of gender to determine rates.
- Driving history: Every insurance company will use the driver’s history of tickets and accidents to determine rates.
- Location: Insurance companies will look at local risks to calculate rates, such as past weather disasters, theft, and crashes in your area.
- Number of cars and drivers: The more drivers and vehicles there are on the policy, the more the insurance company will charge. However, most insurance companies offer a discount for multiple vehicles.
These are the main factors that insurance companies use when calculating insurance premiums. The best way to see what insurance companies will charge you is to get free insurance quotes.
Auto Insurance Premiums Increase
Unfortunately, insurance rates don’t always stay the same. The most common things that increase your insurance rates are car crashes and traffic tickets.
Since you typically file a claim as soon as possible to get a payout, you’ll see your rates increase immediately if you file an at-fault claim for a crash. However, with tickets, such as speeding tickets, you may not see your rates go up until your next policy renewal when your insurance company rechecks your driving record.
You could also see your rates increase slightly even if your driving record and insurance profile stay the same. Sometimes, insurers will increase prices slightly to compensate for an increase in claims filed with the company or if your area increases in risk.
If your rates increase, you should shop around to see if other insurance companies offer a lower rate. For example, if you get a speeding ticket and your rates go up, get quotes from the best auto insurance companies for drivers with speeding tickets.
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Average Auto Insurance Premiums
According to the latest data from the National Association of Insurance Commissioners, the average cost of auto insurance in the U.S. is $1,070 annually. Look at the table below to see the average cost of car insurance by state.
Full Coverage Auto Insurance Monthly Rates by State
| State | Allstate | American Family | Farmers | Geico | Liberty Mutual | Nationwide | Progressive | State Farm | Travelers | USAA | U.S. Average |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Alabama | $108 | $105 | $133 | $89 | $162 | $96 | $112 | $108 | $79 | $56 | $105 |
| Alaska | $135 | $105 | $127 | $76 | $164 | $108 | $97 | $65 | $93 | $60 | $103 |
| Arizona | $180 | $114 | $135 | $65 | $178 | $116 | $84 | $81 | $104 | $63 | $112 |
| Arkansas | $162 | $137 | $165 | $91 | $99 | $128 | $131 | $80 | $111 | $55 | $116 |
| California | $199 | $138 | $167 | $101 | $216 | $142 | $132 | $108 | $122 | $74 | $140 |
| Colorado | $166 | $118 | $163 | $94 | $92 | $107 | $120 | $94 | $114 | $78 | $115 |
| Connecticut | $196 | $125 | $151 | $62 | $201 | $112 | $133 | $91 | $83 | $77 | $123 |
| Delaware | $207 | $130 | $157 | $101 | $494 | $144 | $90 | $116 | $82 | $43 | $156 |
| District of Columbia | $241 | $115 | $139 | $69 | $180 | $172 | $115 | $111 | $102 | $48 | $129 |
| Florida | $183 | $188 | $227 | $89 | $161 | $103 | $153 | $99 | $166 | $47 | $142 |
| Georgia | $165 | $124 | $149 | $61 | $263 | $152 | $115 | $107 | $110 | $71 | $132 |
| Hawaii | $118 | $82 | $99 | $59 | $128 | $84 | $78 | $64 | $72 | $44 | $83 |
| Idaho | $128 | $93 | $92 | $57 | $79 | $82 | $91 | $53 | $57 | $40 | $77 |
| Illinois | $176 | $114 | $117 | $47 | $76 | $93 | $89 | $64 | $87 | $62 | $92 |
| Indiana | $140 | $107 | $79 | $63 | $183 | $97 | $69 | $71 | $69 | $43 | $92 |
| Iowa | $126 | $95 | $82 | $81 | $116 | $73 | $75 | $65 | $92 | $55 | $86 |
| Kansas | $160 | $114 | $144 | $75 | $174 | $92 | $127 | $81 | $87 | $56 | $111 |
| Kentucky | $236 | $164 | $197 | $80 | $168 | $184 | $111 | $98 | $139 | $72 | $145 |
| Louisiana | $206 | $176 | $212 | $141 | $274 | $181 | $161 | $124 | $156 | $98 | $173 |
| Maine | $108 | $84 | $117 | $37 | $120 | $87 | $94 | $59 | $61 | $37 | $80 |
| Maryland | $201 | $116 | $140 | $135 | $181 | $106 | $121 | $107 | $103 | $80 | $129 |
| Massachusetts | $143 | $99 | $120 | $72 | $155 | $103 | $95 | $78 | $88 | $53 | $101 |
| Michigan | $406 | $204 | $335 | $99 | $424 | $257 | $152 | $209 | $183 | $107 | $238 |
| Minnesota | $160 | $93 | $108 | $90 | $375 | $87 | $101 | $67 | $94 | $68 | $124 |
| Mississippi | $147 | $120 | $145 | $72 | $119 | $96 | $120 | $82 | $88 | $54 | $105 |
| Missouri | $148 | $106 | $135 | $90 | $129 | $66 | $98 | $85 | $114 | $50 | $102 |
| Montana | $154 | $125 | $164 | $82 | $59 | $88 | $171 | $70 | $111 | $50 | $107 |
| Nebraska | $125 | $112 | $130 | $92 | $179 | $77 | $95 | $69 | $102 | $56 | $104 |
| Nevada | $165 | $140 | $155 | $110 | $111 | $112 | $82 | $103 | $91 | $69 | $114 |
| New Hampshire | $128 | $77 | $93 | $50 | $198 | $77 | $63 | $59 | $68 | $41 | $86 |
| New Jersey | $157 | $115 | $231 | $74 | $279 | $119 | $93 | $113 | $136 | $61 | $138 |
| New Mexico | $158 | $103 | $131 | $90 | $161 | $96 | $86 | $69 | $91 | $65 | $105 |
| New York | $147 | $137 | $165 | $78 | $200 | $164 | $96 | $137 | $175 | $85 | $138 |
| North Carolina | $169 | $82 | $99 | $69 | $82 | $111 | $32 | $77 | $99 | $44 | $86 |
| North Dakota | $136 | $145 | $107 | $61 | $398 | $77 | $110 | $76 | $88 | $44 | $124 |
| Ohio | $120 | $62 | $96 | $59 | $106 | $114 | $85 | $70 | $63 | $41 | $82 |
| Oklahoma | $135 | $118 | $136 | $109 | $184 | $122 | $110 | $91 | $105 | $68 | $118 |
| Oregon | $153 | $106 | $111 | $93 | $141 | $111 | $78 | $75 | $97 | $58 | $102 |
| Pennsylvania | $148 | $108 | $131 | $68 | $219 | $86 | $148 | $76 | $75 | $57 | $112 |
| Rhode Island | $189 | $151 | $183 | $125 | $235 | $190 | $116 | $76 | $103 | $65 | $143 |
| South Carolina | $133 | $118 | $166 | $79 | $185 | $118 | $105 | $88 | $105 | $69 | $117 |
| South Dakota | $136 | $151 | $113 | $57 | $230 | $76 | $105 | $67 | $97 | $58 | $109 |
| Tennessee | $144 | $102 | $86 | $78 | $184 | $118 | $92 | $72 | $88 | $58 | $102 |
| Texas | $201 | $176 | $137 | $105 | $178 | $154 | $121 | $90 | $101 | $62 | $132 |
| Utah | $117 | $105 | $115 | $73 | $119 | $93 | $95 | $103 | $88 | $50 | $96 |
| Vermont | $142 | $85 | $103 | $38 | $100 | $77 | $181 | $87 | $75 | $42 | $93 |
| Virginia | $103 | $83 | $100 | $69 | $129 | $86 | $61 | $63 | $73 | $43 | $81 |
| Washington | $114 | $91 | $102 | $75 | $92 | $70 | $60 | $69 | $81 | $46 | $80 |
| West Virginia | $162 | $115 | $139 | $83 | $196 | $104 | $110 | $79 | $102 | $67 | $116 |
| Wisconsin | $123 | $63 | $109 | $62 | $84 | $226 | $94 | $58 | $72 | $47 | $94 |
| Wyoming | $155 | $111 | $130 | $111 | $75 | $114 | $106 | $82 | $98 | $57 | $104 |
One of the most expensive states for car insurance is Louisiana, with an average cost of around $1,500 annually. In contrast, one of the cheapest states is North Dakota, with the average premium being around $700, a significant difference from Louisiana.
How to Reduce Auto Insurance Premiums
Even if you live in one of the most expensive states for car insurance, that doesn’t mean you have to pay extremely high rates. You can take steps to reduce your car insurance premiums, from shopping around to increasing your deductible.
- Drop unnecessary coverages. If you have an older car, drop collision and comprehensive insurance if the amount you pay in premiums will soon equal your car’s value.
- Get quotes. Get multiple insurance quotes to ensure you get the best deal on car insurance premiums.
- Get discounts. Qualify for as many auto insurance discounts as possible at your provider, whether it’s a defensive driving or paperless billing discount.
- Increase deductible. Increasing your auto insurance deductible will lower your rates. Ensure you can still pay the new deductible after an accident.
All drivers can reduce their auto insurance premiums with careful planning and taking advantage of discounts.
More About Auto Insurance Premiums
Various factors get used by insurers to calculate your car insurance premiums, including driving record, age, and coverage requirements. For example, you’ll have higher premiums in some states due to higher coverage limits.
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— AutoInsurance.org (@AutoInsurance) October 2, 2023
The best way to determine your insurance premiums is to get quotes from multiple companies — this also allows you to find the cheapest company for you. Get started today by entering your ZIP code into our free quote comparison tool below.
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Frequently Asked Questions
Is a car insurance premium paid monthly or yearly?
The answer depends on what type of payment plan your insurance company offers and which you choose. You may have monthly or six-month to 12-month payments.
Generally, most insurance companies offer a discount if you pay for six months or a year of coverage in full instead of monthly payments.
What is the difference between a car insurance quote and an insurance premium?
A car insurance quote estimates how much the insurance company will charge you for coverage. However, your insurance premium, which you pay after signing up with the company, may differ from the quote you received.
The quote process collects more simplified information to gauge a base rate. Then, once a driver signs up, the insurer looks more in-depth into a driver’s profile to calculate the exact premium.
What is the difference between a deductible and a premium?
Your deductible is the amount you agree to pay out of pocket in a claim. So if you have a $500 deductible and $2,000 worth of damages, your insurance company will pay you $1,500. On the other hand, your premium is the amount you pay for insurance coverage.
Is there an insurance premium grace period?
Yes, insurance companies offer a grace period if you miss an insurance premium payment, so you aren’t immediately without coverage.
This grace period can range anywhere from a week to a month. Once the grace period is over, the insurance company can cancel your policy if you still haven’t made payments.
Can you get back the money paid for insurance premiums?
Yes, you may be eligible for a refund on your auto insurance premium if you cancel your policy before the term expires. The refund amount will depend on the specific terms outlined in your policy and the timing of the cancellation. Insurance companies typically prorate the premium refund based on the unused portion of the policy term.
What happens if I cannot afford to pay my insurance premium?
It’s important to maintain continuous auto insurance coverage to comply with legal requirements and protect yourself financially. If you’re struggling to pay your insurance premium, contact your company and explain the situation.
They may be able to offer payment plans or suggest alternative coverage options that better fit your budget. Cancelling your policy due to non-payment of your premium can lead to penalties, driving without auto insurance, and potential difficulties in obtaining coverage in the future.
Free Auto Insurance Comparison
Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Heidi Mertlich
Licensed Insurance Agent
Heidi works with top-rated insurance carriers to bring her clients the highest quality protection at the most competitive prices. She founded NoPhysicalTermLife.com, specializing in life insurance that doesn’t require a medical exam. Heidi is a regular contributor to several insurance websites, including FinanceBuzz.com, Insurist.com, Finance101.com, and Forbes. As a parent herself, she under...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.