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Car insurance companies use many different factors to determine your premium, which is what you pay every month for your insurance. It’s common to pay for your policy in monthly installments, though insurers also allow you to pay in a lump sum — an up-front annual payment — which may qualify you for a discount.
Premiums vary by driver. While insurance companies generally take into account your driving history, age, location, and more, the policy type you choose or the vehicle you drive can also influence your premium. Learn more about car insurance premiums and how to save money when shopping for car insurance.
Understanding car insurance premiums
Your car insurance premium equals the amount you regularly pay for your coverage. Car insurance reduces your financial risk in the event of an accident or some other type of damage to your car.
You can avoid potentially larger financial costs later by paying a smaller amount regularly, as the insurance company will cover your costs. For instance, if you get in an accident or some other covered damage occurs, the insurer covers some or all of the cost depending on the type and levels of coverage you’ve purchased.
It’s important that you pay your monthly premium on time. Otherwise, you’ll face a lapse in coverage. If you miss multiple payments, your insurer can cancel your car insurance policy. Depending on the car insurance company and your policy, you may pay premiums monthly, semiannually, or annually. You can usually choose to send in payments or have them automatically deducted from your bank account.
Premium vs. deductible
A deductible is the out-of-pocket cost you pay for covered damages before your insurance coverage kicks in. A premium is the amount your insurance company charges in exchange for protecting you and your car from financial damage in case of a covered event.
While deductibles only apply when you file a claim, you have to pay your premium on an ongoing basis to maintain coverage. Your premiums don’t count as part of your car insurance deductible.1
If you have coverage with a $250 deductible and have an accident that results in $8,000 in covered damages, you’ll pay $250 as your share of the cost. The insurance company pays the remaining $7,750.
Factors that influence your premium
To calculate car insurance rates, insurers use different factors to determine your risk levels for having an accident and filing claims. If you demonstrate a higher risk, you’ll likely pay a higher premium.2
Learn more in the following sections about various rating factors — driver, policy, and vehicle factors — that an insurer generally considers when determining your monthly premium.
Driver factors
Your insurance company may consider your location and age when determining your monthly rate. Here are a few more driving factors to keep in mind:
Policy factors
Learn more about how the policy type you choose influences your premium cost:
Coverage types: The two main types of car insurance are liability only and full-coverage car insurance. Liability-only coverage is cheaper than full coverage, as it doesn’t offer much financial protection for drivers, while full-coverage insurance includes additional coverage in addition to liability.
Coverage limits: Most states require a minimum coverage amount for liability insurance, but you can always choose a higher limit. Keep in mind that selecting a higher coverage amount results in higher premiums.5
Deductible amount: The deductible amount that you choose typically affects how much you pay for insurance. If you raise your deductible, you’ll cover more out-of-pocket costs, which lowers your car insurance premium. On the other hand, reducing your deductible means higher rates.
Optional endorsements: If you want to add more coverage to your policy, you may purchase add-ons that offer additional protection and best suit your situation. They vary from roadside assistance to accidental forgiveness, gap insurance, and more.
Discounts: Drivers who insure multiple vehicles on their policy or purchase their car and home insurance from the same insurance company are eligible for a variety of discount opportunities. Ask your insurer if you qualify for any discounts.
Vehicle factors
The list below highlights how vehicle factors can also influence your monthly premium:
Vehicle type: The type of vehicle you drive can affect your monthly premium. If you drive a high-performance car that’s more expensive to repair or that you may drive more aggressively, you’ll likely see higher rates compared to a low-value or older vehicle. High-value cars can also be more expensive to replace.
Safety features: You can get a discount on your car insurance premium if you add safety features that would reduce your chances of having an accident or facing severe injury. For example, having or installing anti-lock brakes, airbags, and anti-theft systems can earn you a discount.
Vehicle age: Your premium can vary depending on the age of your vehicle. Drivers with an older car typically have cheaper rates, as the older the car, the less it’ll cost to repair or replace.
Theft risk: Insurers may increase your premium due to the likelihood of you having your vehicle stolen, as you’re more at risk of filing a claim. But many insurance companies offer discounts if you take precautions and install anti-theft devices that deter car break-ins.
Average cost of car insurance
The national monthly average cost for liability-only and full-coverage car insurance is $101 and $179, respectively. While many states saw a decrease in premium cost in the first half of 2025, Insurify analysts predict that rates may increase by 4% to 7% by the end of 2025.
A full-coverage policy with liability, collision, and comprehensive coverages will cost more than liability-only coverage. If paying for full-coverage insurance to have your car repaired or replaced in an accident would cost more than the value of your car, you should consider trimming your coverage.
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How to save on your insurance premium
You have multiple ways to save money on your car insurance premium:
Car insurance premium FAQs
Car insurance companies consider a variety of factors to determine your monthly premium, though you can still take steps to lower yours. Here’s some more information to help you understand how premiums work and how to find one that’s affordable for you.
What is a six-month total premium?
Many insurers figure out the total premium you’ll pay for an entire term of six months. You can divide that into more manageable monthly payments, but car insurance companies generally determine coverage premiums six or 12 months at a time.
What’s the difference between a car insurance premium and a deductible?
The premium is the amount you regularly pay to keep your car insurance policy in force. The deductible is the amount of money you pay out of pocket when you have a claim and before the insurance kicks in.
When do you pay your premium?
You pay for your premium at the beginning of the month. You can usually choose to pay your premium semiannually or make monthly payments. Some insurers also offer discounts if you make up-front payments.
How can you lower your car insurance premium?
If you’re a safe driver with an accident-free record, you may be eligible for many discounts that can lower your car insurance premium. You can also get cheaper rates by adding safety features to your car, increasing your deductible, and reducing your coverage limits.
Is $300 per month bad for car insurance?
Paying $300 per month for car insurance is expensive. On average, drivers pay $101 per month for liability coverage and $179 per month for full-coverage insurance.
Insurance companies use various deciding factors to determine your premium, including your age, location, and driving history. Shop around and compare quotes from different insurers to find affordable coverage that best suits your needs.
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