What Is an Insurance Premium?

An insurance premium is the price you pay for the policy. Costs can vary based on the type of insurance you buy.
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An insurance premium is the amount you pay for an insurance policy. Simply put, premiums are what you pay insurance companies in exchange for coverage. Therefore, when you hear “insurance premium," think “insurance price.”

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.

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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 $1,630 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 $561 on average for minimum car insurance.

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

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 of coverage you buy and your employment status, can impact the price. The average cost of life insurance is $27 a month, based on a 20-year, $500,000 term life policy for a 40-year-old, according to data provided by Quotacy.

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

Renters insurance premiums

On average, renters insurance premiums are $14 a month, according to NerdWallet’s 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.

Homeowners insurance premiums

The average homeowners insurance premium is $1,765 a year, a NerdWallet rates study 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.

Methodology

Auto insurance rates

NerdWallet averaged rates based on public filings obtained by pricing analytics company Quadrant Information Services. We examined rates for men and women for all ZIP codes in any of the 50 states and Washington, D.C. Although it’s one of the largest insurers in the country, Liberty Mutual is not included in our rates analysis due to a lack of publicly available information.

In our analysis, “good drivers” had no moving violations on record; a “good driving” discount was included for this profile. Our “good” and “poor” credit rates are based on credit score approximations and do not account for proprietary scoring criteria used by insurance providers.

These are average rates, and your rate will vary based on your personal details, state and insurance provider.

Sample drivers had the following coverage limits:

  • $100,000 bodily injury liability coverage per person.

  • $300,000 bodily injury liability coverage per crash.

  • $50,000 property damage liability coverage per crash.

  • $100,000 uninsured motorist bodily injury coverage per person.

  • $300,000 uninsured motorist bodily injury coverage per crash.

  • Collision coverage with $1,000 deductible.

  • Comprehensive coverage with $1,000 deductible.

We used a 2019 Toyota Camry L in all cases and assumed 12,000 annual miles driven.

These are rates generated through Quadrant Information Services. Your own rates will be different.

Renters insurance rates

NerdWallet averaged rates for 30-year-old men and women for multiple insurance companies in every ZIP code across all 50 states and Washington, D.C. We also averaged rates by city. Sample tenants were nonsmokers with good credit living in a two-bedroom apartment.

They had a $500 deductible and the following coverage limits:

  • $30,000 in personal property coverage.

  • $100,000 in liability coverage.

  • $10,000 in additional living expenses coverage.

  • $1,000 in medical payments coverage.

These are sample rates generated through Quadrant Information Services. Your own rates will be different.

Home insurance rates

​​NerdWallet averaged rates for 40-year-old homeowners from a variety of insurance companies in every ZIP code across all 50 states and Washington, D.C. Sample homeowners were nonsmokers with good credit living in a single-family, two-story home built in 1997. They had a $1,000 deductible and the following coverage limits:

  • $300,000 in dwelling coverage.

  • $30,000 in other structures coverage.

  • $150,000 in personal property coverage.

  • $60,000 in loss of use coverage.

  • $300,000 in liability coverage.

  • $1,000 in medical payments coverage.

These are sample rates generated through Quadrant Information Services. Your own rates will be different.

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