Full definition
A premium is the price you pay to maintain your insurance coverage. It can be paid monthly, quarterly, or annually. Your premium is calculated based on your risk factors — for auto insurance, that includes your age, driving record, vehicle type, location, and coverage level. Paying annually is usually 5-10% cheaper than paying monthly.
Real-world example
Your auto insurance premium is $148/month or $1,680/year. Paying annually saves you about $96.
Quick summary
The amount you pay for your insurance policy, usually monthly or annually.
Related terms
- Deductible
The amount you pay out of pocket before insurance kicks in.
- Coverage limit
The maximum amount your insurer will pay for a covered claim.