What Is an Insurance Premium?

You typically pay premiums monthly, semiannually or annually, depending on the policy. Insurers sometimes offer a small discount for bundling your policies or paying your premium annually.

The price of your premium depends on the type of insurance you buy, such as life, renters, auto or homeowners. You may also be responsible for an insurance deductible, which is the amount you pay before the insurer starts covering the costs of a claim.

While your insurance premium is your policy’s sticker price, it won’t be the only cost you’ll incur to get coverage. If you file a claim, you may have to pay a deductible specified in your policy before your insurer pays out.

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Car insurance premiums

Auto insurance premiums are often based on your age, driving record, claims history and vehicle, as well as the amount of coverage you buy.

In general, you’ll pay the highest premiums for full coverage insurance, which includes liability, comprehensive and collision insurance. A full coverage car insurance policy costs a year on average for good drivers with good credit, according to NerdWallet’s auto insurance rates analysis. In contrast, a driver with the same background would pay on average for minimum car insurance.

To find the best price, compare car insurance rates when shopping for a policy.

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Life insurance premiums

Insurers typically use your age and medical history when calculating life insurance premiums. Other factors, such as your credit history, the amount and type of coverage you buy and your employment status, can impact the price. The average cost of life insurance is $26 a month, based on a 20-year, $500,000 term life policy for a 40-year-old, according to NerdWallet’s January 2024 analysis of data provided by Quotacy.

Among the different types of life insurance, permanent policies such as whole life insurance are the most expensive, as coverage can last your entire life. In contrast, term life insurance covers a set period of time, such as 10 or 20 years.

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Renters insurance premiums

On average, renters insurance premiums are $12 a month, according to NerdWallet’s January 2024 renters' rates analysis. The price of your premiums is based on specific details, such as the value of your belongings, whether the building has a burglar alarm and your credit score, in most states. Shop around for renters insurance quotes before buying a policy.

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Homeowners insurance premiums

The average homeowners insurance premium is $1,820 a year, NerdWallet's January 2024 rates analysis found. Homeowners insurance premiums are based on a variety of factors, such as the building’s location and value, your credit score in most states, your claims history and the amount of coverage you want to buy.

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