Auto Insurance Premium

An auto insurance premium is the cost you pay for insurance coverage. Insurance premiums can be paid monthly, annually, or every six months depending on your policy. The national auto insurance premium average is $119 per month, but your car insurance premiums will vary based on your driving history and whether or not you pay your auto insurance bill on time. If you're looking for cheap auto insurance premiums, enter your ZIP code below to start comparing auto insurance costs near you.

Free Auto Insurance Comparison

 Secured with SHA-256 Encryption

Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

Full Bio →

Written by

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

Full Bio →

Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Oct 30, 2020

Advertiser Disclosure

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 insurance industry 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.

An insurance premium is the amount that you pay monthly or annually or within another agreed time period in exchange for insurance coverage from your insurer. Your insurance premium will be defined as part of your insurance contract and enables a policy holder to make a judgment regarding the value of the policy in terms of the premium against the coverage provided. It can be difficult to make “like for like” comparisons based on the premium level alone as specific coverage tends to vary between insurance companies even for similar policy types.premium

How is an auto insurance premium calculated?

There are several steps towards calculating the premium on an insurance policy provided by an insurance company in the United States.

The first step is usually conducted by an actuary, who is a professional who specializes in analyzing and managing risk for insurers, this will be an assessment of the general risks covered by the policy in respect of the general risks facing groups of people with similar characteristics to the policy holder. It is not possible for actuaries to identify the risk presented by a specific individual so it is necessary for them to take into account general characteristics to determine the level of risk. For example; in auto insurance younger drivers are considered to be more risky than drivers over the age of 25, this is because in general these younger drivers have more accidents than the older drivers.

Once the level of risk has been assessed by the insurer’s actuarial team, the insurance company must also include additional figures in its calculation of the premium.

The first is the administrative burden of the policy itself, which will include sums like the commission paid to a broker or an agent to find the client and sign them up to the policy, for the actual in house administration such as filing, IT support and other overheads the company will share between policy holders like building rental, and wage bill, etc.

The insurer also needs to build in a profit margin, as a business the insurance company has a responsibility to its shareholders to make a profit. This is also a good thing for policyholders as it ensures the long-term financial stability of an insurance company and suggests that they will be able to meet their obligations in the case of a rush of claims.

These figures are added together to calculate the overall premium for the client.

Free Auto Insurance Comparison

Compare over 200 auto insurance companies at once!

 Secured with SHA-256 Encryption