Car Insurance Premiums
A consumer new to the concept of insurance will frequently ask what an insurance premium is and how it works. The insurance industry has its own terminology and procedures, which is often confusing. An insurance “premium” is a term describing the cost or price of insurance coverage for a given period of time. When consumers compare car insurance quotes, they can be certain they will end up buying coverage which the cheapest car insurance premiums.
Contractual Obligations
Auto insurance policies are contracts between the insurer and the insured. The car insurance company agrees to pay for any incidents covered by the policy and the policyholder agrees to pay for the monetary value of the policy – the premiums plus any deductibles. Although the entire balance of a policy can be paid up front annually, it is more common for people to make monthly payments for their car insurance rates. These payments are called premiums.
A policy can be anywhere from 6-18 months, and the premiums or rates will vary widely. For example, a $500 per year insurance premium may provide 100/300/100 liability limits of auto insurance coverage in Texas.
Insurance companies bill the insured for finance charges for offering the privilege of installments, resulting in higher premiums when consumers could have paid up front and obtained cheaper rates.
Also, the term, or length, of the car insurance policy is a factor in determining your auto insurance rates. The cost of insurance may increase when consumers commit to a shorter term. For example, an annual policy is cheaper and more affordable than 12 single, month-to-month policies. One of the reasons for this is that the insurance company has to underwrite the policy by calculating the risk associated with a driver, or any policyholder, and therefore, the costs of monthly underwriting expenses get passed on to consumers.
Premium Basics
Liability auto insurance is required almost universally. The state minimum car insurance requirements of liability coverage will be the basis of a policy’s price. By keeping to the required minimums and not electing for additional coverage, consumers will have the lowest premiums possible, perhaps even as low as a few dollars per month.
However, this is not recommended, as it leaves the policyholder vulnerable in other areas, such as paying for their own vehicle damage repair, medical costs, litigation, lawsuit and settlement expenses, and any liability coverage beyond the minimum limits.
Car Insurance Quotes
Policy value and premium prices are influenced by the insured’s age, sex, credit score, state of residence, and driving record, plus the car’s make and model, state mandatory minimum liability requirements, and any extra coverage the policyholder wants to buy.
By entering your 5-digit zip code, MyCarInsuranceRates.com provides consumers free car insurance quotes online, allowing you to compare coverage, rates, and auto insurance companies to find the best, affordable policy available in the market.
Enter your zip code to begin an auto insurance quote now and get the cheapest car insurance premiums.
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