What is an insurance premium? An auto insurance premium is typically the cost of your insurance coverage. Depending on your firm's insurance term, your total auto insurance premium amount may protect you for six months or one year. The average annual premium for an entire coverage policy is $1,771 for 2022. It costs $545 per year for the minimum coverage.
An auto insurance premium keeps your insurance coverage in force. Your insurance provider agrees to protect you and your car in the event of an accident or another covered loss as long as you continue making on-time auto insurance premium payments. The insurer can terminate your coverage after a specified time if you stop paying the payment. When your auto insurance provider terminates your policy, your coverage ends, and you experience a lapse in protection.
How Do you Pay an Auto Insurance Premium?
Your insurance company most likely offers a variety of payment methods. Depending on the length of the insurance term, you can pay at once or in regular installments, typically monthly, quarterly, or semi-annual. You often receive the greatest insurance rate when you pay for your insurance in full upfront and forgo any installment or processing costs.
Before selecting a payment plan, there are a few factors to consider. Even paying your auto insurance premium in full may save you money; you may want to consider paying in installments if paying it all at once will strain your finances. Most insurance firms also permit you to alter your payment schedule amid the policy term.
You may want to begin paying for your insurance policy monthly but then realize that full payment at once makes more sense. Getting in touch with your insurance agent if you have particular inquiries about your available payment plan options could be beneficial.
How Can You Calculate Your Auto Insurance Premium
Auto insurance premiums are incredibly personalized. The insurance providers use a variety of variables to determine your specific insurance premium. Some of the factors affecting your auto insurance premium are listed below:
- Your Age and State
In most states, the two main factors affecting your auto insurance premiums are your age and where you live. Young drivers, especially teenagers, pay the highest insurance costs because they lack driving experience. Auto insurance costs vary considerably by state. Each state's insurance department decides which criteria can be taken into account when calculating auto insurance premiums. ZIP codes are essential in states besides California and Michigan.
Suppose your area experiences more severe weather, has a high percentage of uninsured drivers, or has a high accident rate. In that case, your auto insurance premiums may be higher than those in other states.
- Your credit-based insurance score
When requesting a car insurance estimate, your credit score is crucial. Insurance companies view drivers with bad credit as high-risk since they are more possibly to be involved in an accident or make a claim. Four states, including Hawaii, California, Michigan, and Massachusetts, have prohibited using credit scores as a component for auto insurance premiums. However, raising your credit score in many jurisdictions may result in reduced auto insurance premiums.
- Your driving record and claims history
When deciding your auto insurance quote, insurers consider your driving history and claims experience. If you have a history of violations, it shows you are a risky driver. The insurance provider raises the cost of coverage as a result. Insurance claims follow the same rules. You are more likely to file another insurance claim after filing one. The method the insurance provider manages their risk and gets ready for future claims is when car insurance premium increase.
- Your Vehicle
The amount of your auto insurance premium is significantly influenced by the make and model of your vehicle. For instance, insurance for a luxury SUV or a brand-new car can be significantly more expensive than insurance for a used car that is ten years old. If something fails or you get into an accident, high-value cars cost more to fix. If your car is stolen or destroyed, the insurance provider must make up the difference based on the car's market value. In general, the higher the value of your vehicle, the higher your auto insurance premium.
How to Save on Auto Insurance Premiums
Even though auto insurance premiums can be high, several strategies exist to reduce them. Here are some ways to find cheap auto insurance:
- Apply Discounts
Nearly all insurance providers provide discounts that can reduce your auto insurance premiums. Different discounts have different levels of importance. Pay close attention to the discounts each insurance company offers when looking for auto insurance. Examples of typical discounts include:
- Being a good student
- Not filing any claims
- Participating in a tracking program
- Having an anti-theft device in your vehicle.
- Bundling your insurance plans
- Pay your Auto Insurance Premium in Full
If you can afford the upfront cost, paying the annual cost of your auto insurance premium in full can help you receive a lower rate. Even if it is not promoted, most insurance providers provide this discount. The special discounts vary depending on the insurance company, but they are often in the range of 5 to 15%. Even a 5% discount can be beneficial if your auto insurance premium is high.
Bottom Line
Make sure to compare quotes for auto insurance because numerous factors might affect your insurance premium. To obtain the best coverage and costs for your needs, collect and compare insurance premiums from many auto insurance providers.