A premium in car insurance is the amount of money you pay to an insurance company to keep your car policy active and get coverage. It’s usually paid monthly, every six months, or yearly, and if you stop paying it, your insurance can be canceled.

What a Premium Really Is

  • It is the price of your car insurance policy itself, sometimes also called your insurance “rate”.
  • In return for paying this premium, the insurer agrees to cover you for things listed in your policy, like damage to your car or injuries you cause others, up to your policy limits.
  • Your total premium often covers a period like 6 or 12 months, even if you choose to pay it in smaller installments.

How You Pay Your Premium

  • Common payment options include monthly, every six months, or annually.
  • Some insurers give a small discount if you pay your 6‑month or annual premium in one lump sum instead of monthly.
  • If you miss payments and the policy lapses, you lose protection and may have to start a new policy at a higher premium due to the lapse.

What Affects Your Premium Amount

Insurers calculate car insurance premiums based on how risky you seem as a driver and car owner.

Key factors often include:

  • Your driving record (accidents, claims, speeding tickets).
  • Age and driving experience.
  • The car you drive (repair costs, safety, theft risk).
  • How much you drive (annual mileage) and where you live.
  • The level of cover you choose (e.g., minimum liability vs. full coverage).

Because of all these factors, each person’s car insurance premium is personalized and there’s no single “standard” price.

Premium vs Deductible (Important Difference)

  • Your premium is what you pay regularly to have insurance in place.
  • Your deductible is what you pay out of pocket if you make certain claims (like collision or comprehensive) before the insurer pays the rest.
  • Often, choosing a higher deductible can lower your premium because you’re agreeing to pay more if something happens.

A Quick Real-World Snapshot

  • In the U.S., the national average premium for full coverage car insurance was around $2,677 per year in mid‑2025, while minimum coverage averaged about $807 per year.
  • Many drivers compare quotes from multiple companies because each uses its own formulas and data to set premiums for the same driver and car.

TL;DR: Your car insurance premium is the price you pay (monthly or yearly) to keep your policy active so the insurer will cover you according to the terms of your policy.