What Is an Insurance Premium?

Companies may calculate premium on a 6-month or 12-month basis. When comparing insurance quotes, be sure to check the start and end dates of coverage.

How is my insurance premium determined?

Once a base rate is determined, individual insurance premiums are calculated based on a variety of factors that are unique to each policyholder. For example, your premium could be based on the following factors, among others:

• Your claim history
• The characteristics of what you are insuring (e.g., vehicle type or size of home)
• The number of drivers in a household

Adding endorsements to your policy may result in additional charges.

These factors help insurance companies price policies based on an individual's actual risk of having a loss.

Relationship between a deductible and a premium

The policy limits and deductibles you choose can also affect your insurance premium. As a rule of thumb:

• A higher deductible results in a lower premium.
• A higher coverage limit results in a higher premium.

If you're looking to lower your premium, a higher deductible can help.

How can I reduce my insurance premium?

Consider some of these potential solutions to reduce your premium while maintaining the coverage you need:

• Contact us to conduct a policy review and ensure you’re getting all applicable discounts.

• Bundle your auto and homeowners policies for discounts on both.

• Raise your deductible to reduce your monthly premium. Just note that this could mean higher out-of-pocket costs if you have to file a claim.

• Consider whether you still need certain endorsements or coverages. For example, physical damage coverage may not be cost-effective if your car is more than five years old.