What is a car insurance premium?
Car insurance premiums are the amount drivers pay insurance companies for coverage. Premiums are calculated based on several factors, including a driver’s age and driving record.
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UPDATED: Sep 8, 2022
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Table of Contents
- 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
What is an insurance premium? The simplest definition is that premiums, also known as insurance rates, are the monthly or semi-annual amounts you pay your insurance company for coverage.
At the best companies, several factors affect your insurance premium, from the car you drive to your coverage options.
More: Car Insurance Deductibles
Read on to learn more about what insurance premiums are, how they get calculated, average premiums, and more.
Table of Contents
What is a car insurance premium, and how are they calculated?
What is a premium for car insurance? 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.
More: What is a car insurance policyholder?
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.
- 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 premiums. The best way to see what insurance companies will charge you is to get free insurance quotes.
When do 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.
More: What is the difference between an auto insurance company vs. a broker?
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 Car Insurance Premiums
More: What is auto insurance?
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.
State Allstate American Family Farmers Geico Liberty Mutual Nationwide Progressive State Farm Travelers USAA Average
AK $1,667 $1,195 $807 $737 $1,223
AL $1,332 $1,644 $1,099 $1,999 $1,189 $1,388 $1,337 $972 $691 $1,370
AR $2,007 $1,120 $1,227 $1,581 $1,620 $989 $1,367 $674 $1,416
AZ $2,226 $1,664 $808 $1,436 $1,039 $999 $1,292 $780 $1,352
CA $1,996 $1,553 $1,732 $1,774
CO $2,054 $1,457 $2,010 $1,161 $1,133 $1,324 $1,490 $1,168 $960 $1,475
CT $2,421 $768 $2,486 $1,382 $1,641 $1,126 $1,030 $956 $1,550
DC $2,976 $855 $2,126 $1,420 $1,371 $592 $1,750
DE $2,555 $1,243 $6,117 $1,777 $1,115 $1,431 $1,019 $532 $2,180
FL $2,263 $1,103 $1,995 $1,272 $1,889 $1,223 $578 $1,624
GA $2,035 $754 $3,259 $1,878 $1,417 $1,324 $879 $1,778
HI $1,113
IA $1,169 $1,008 $1,006 $1,432 $900 $930 $804 $1,143 $678 $1,049
ID $1,587 $1,148 $1,139 $708 $975 $1,018 $653 $707 $495 $992
IL $2,172 $1,405 $587 $935 $1,146 $1,103 $796 $1,077 $767 $1,153
IN $1,729 $1,328 $977 $785 $2,269 $1,198 $849 $872 $856 $529 $1,207
KS $1,973 $1,408 $1,781 $923 $2,148 $1,141 $1,575 $1,003 $1,071 $697 $1,447
KY $988 $2,080 $2,277 $1,377 $1,212 $1,725 $886 $1,610
LA $2,547 $1,739 $1,990 $1,537 $1,211 $1,953
MA $1,342
MD $2,481 $1,671 $1,313 $1,493 $1,322 $990 $1,656
ME $1,334 $1,446 $454 $1,485 $1,166 $724 $759 $455 $1,053
MI $5,017 $4,140 $1,219 $5,250 $3,184 $1,880 $2,585 $2,268 $1,320 $3,193
MN $1,977 $1,156 $1,333 $1,118 $4,640 $1,070 $828 $837 $1,732
MO $1,831 $1,313 $1,674 $1,112 $1,597 $816 $1,212 $1,051 $618 $1,326
MS $1,822 $886 $1,477 $1,190 $1,487 $1,018 $1,092 $671 $1,282
MT $1,903 $2,025 $1,020 $726 $1,093 $2,109 $870 $614 $1,392
NC $2,095 $851 $1,020 $1,367 $393 $949 $1,228 $1,129
ND $1,679 $1,793 $1,324 $749 $4,919 $949 $1,364 $943 $542 $1,715
NE $1,545 $1,381 $1,606 $1,139 $2,213 $952 $1,175 $850 $687 $1,358
NH $1,585 $624 $2,453 $953 $785 $729 $510 $1,188
NJ $1,948 $2,861 $917 $3,446 $1,154 $1,403 $1,679 $1,915
NM $1,958 $1,615 $1,119 $1,186 $1,069 $855 $799 $1,300
NV $2,046 $1,734 $1,915 $1,361 $1,375 $1,386 $1,018 $1,272 $1,122 $851 $1,470
NY $1,820 $963 $2,473 $2,026 $1,188 $1,695 $2,159 $1,053 $1,761
OH $1,483 $764 $1,193 $728 $1,311 $1,408 $1,051 $863 $784 $507 $1,065
OK $1,668 $1,684 $1,350 $2,279 $1,362 $1,122 $839 $1,577
OR $1,896 $1,313 $1,378 $1,155 $1,738 $1,372 $959 $926 $1,197 $720 $1,326
PA $1,829 $843 $2,704 $1,066 $1,834 $938 $931 $705 $1,449
RI $2,333 $1,547 $2,905 $2,351 $1,438 $939 $1,275 $801 $1,827
SC $1,650 $2,059 $979 $1,459 $1,294 $1,089 $851 $1,422
SD $1,682 $1,867 $1,398 $706 $2,849 $943 $1,298 $827 $1,446
TN $1,777 $1,065 $970 $1,464 $1,141 $895 $1,090 $723 $1,200
TX $2,488 $2,171 $1,303 $1,908 $1,493 $1,109 $772 $1,745
UT $1,442 $1,296 $1,417 $906 $1,466 $1,154 $1,174 $1,269 $614 $1,266
VA $1,277 $859 $1,061 $754 $785 $537 $947
VT $1,759 $469 $1,242 $954 $2,233 $1,079 $523 $1,289
WA $1,415 $1,130 $1,260 $922 $1,140 $866 $746 $858 $565 $1,042
WI $1,521 $774 $1,346 $766 $1,039 $2,797 $1,158 $721 $578 $1,265
WV $2,000 $1,030 $2,419 $1,288 $1,362 $979 $828 $1,513
WY $1,918 $1,604 $1,369 $922 $1,017 $705 $1,366
More: What is liability auto insurance coverage?
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 Your Car 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 car insurance discounts as possible at your provider, whether it’s a defensive driving or paperless billing discount.
- Increase deductible. Increasing your 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.
The Final Word on Car Insurance Premiums
More: Rental Car Reimbursement
Insurance companies use numerous factors to calculate your car insurance premiums, from your driving record to your age. In some states, you’ll have higher rates based on your location.
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.
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Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Frequently Asked Questions
When do I pay my car insurance premium?
Is an 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 a grace period if I don’t pay my insurance premium?
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.
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.
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Written by
Rachel Bodine |
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Reviewed by
Daniel Walker
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