What Is an Auto Insurance Premium?

Shopping for car insurance seems to be more complicated than many other decisions we must make while buying a car. When you are going through that endless list of providers and coverage types, you may wonder whether you're making the right choice.

Understanding everything you need to know about auto insurance before buying one can help you make the right choice. The premium is one of the most important parts of an auto insurance policy. If you are wondering what an auto insurance premium is, the following sections should shed light on the subject.

What Is an Auto Insurance Premium?

An auto insurance premium may be one of the most crucial parts of auto insurance. It is the amount you need to pay for your car insurance, which is a policy that covers any damage that occurs to your vehicle.

You can choose between different providers, coverage, and plans. You can even choose annual, semiannual, or quarterly plans. However, the basic premise remains the same: You need to make payments on time to keep your auto insurance.

Here are some factors that are used by companies to determine your initial auto insurance quote.

Your car.

The model and type of car you have purchased and its market value will determine your initial auto insurance quotes. The more valuable and rarer a car, the more expensive the premium. Moreover, if it is more susceptible to damage, it will be costlier to insure.

It is important to think carefully before buying a car as that can increase your costs over time. Instead of asking, “What is an auto insurance premium” perhaps it is time to consider how the car model you own will affect your auto insurance premium.

Your coverage.

What kind of coverage are you looking for? If it is simply collision coverage you desire, you can get away with a lower auto insurance premium because the more coverage you add, the more expensive the final premium.

For example, in some car crashes, the other party may be unable to pay for damage to your car despite having caused it. This is because not everyone gets auto insurance. To prevent this, you must get more comprehensive coverage to avoid paying for damages in the future.

Your driving record.

As a driver, you have a considerable role to play in determining the coverage of the car. Your driving record, the number of traffic violations you committed, and their severity can all contribute to an increased premium over time.

Moreover, you may get more discounts or a lowered rate if you don't drive that often. However, you might have to apply for this first; not every company offers it.

Other factors that decrease premiums include driving experience and a good record. Insurance companies may increase premiums for younger or older drivers, but middle-aged people with a good record often get lower premiums.

Where you live.

The state where you live and drive your car will often impact your auto insurance premium. This is because each state has different requirements for auto insurance coverage and varying rates and regulations.

If you live in a state that experiences more vandalism, you might have to get add-ons in your coverage. Moreover, where accidents are more common, states might add collision coverage to your premium.

Your credit scores.

Credit scores used to be much more important when determining your insurance premiums. However, they are quickly being abandoned as a factor by many states. However, credit scores are still important in the final decision regarding your premium in some states.

Does Auto Insurance Remain the Same?

Your auto insurance might not remain the same throughout. In fact, most auto insurance premiums differ from the quotes you receive at the beginning of the process. The question, “What is an auto insurance premium” should be followed by, “What affects auto insurance over time?”

Auto insurance premiums usually change annually or semiannually. However, it all depends on the insurer. Ultimately, the terms and conditions provided by your car insurance company can make a difference, so ensure that you go through the fine print.

Factors That Could Change Your Auto Insurance Premium

One of the most common factors that cause auto insurance premiums to rise is the number of claims filed in your state. Moreover, local insurance laws can also affect your insurance rates. However, the factors that affect auto insurance rates the most are related to your car and driving record.

You should ask yourself the following questions if you have recently experienced an increase in your auto insurance premium.

• Have you recently filed a claim on your auto insurance?
• Have you experienced a violation that has been added to your driving record?
• Has the number of vehicles or drivers under your auto insurance policy increased?
• Has your coverage changed?

Also, deductibles are a major factor that affect your car insurance premium.

The Procedure of Auto Insurance Premium Payment

Now that you know what an auto insurance premium is and all the factors that could lead to changes in the premium, you may wonder how you can pay the premium. Here are some of the steps you might need to follow.

• Go through the company website and carefully read the terms and conditions.
• Choose a method of receiving the auto insurance premium bill. This could come in the form of a statement in the mail, an email alert directing you to the website’s payment portal, or a popup notice on the mobile app. The payment can also be automatically deducted from your checking account so you never risk missing it.
• Wait for the bill and pay it before the due date. You might have to give your insurer sensitive information, such as credit card details, every time you pay your bills.
• After you have paid that first premium, make sure you add regular reminders according to the duration between this payment and the next. You can also avail yourself of possible discounts when you set up automatic payments or pay the premium in full at once.

Tips to Lower Your Auto Insurance Premium

Auto insurance premiums may be more or less unchangeable. However, there are certain things you can do to impact the premium cost. Here are a few.

Look for a reliable auto insurance company on BindRight.

The best way to look for a reliable company is to compare different quotes online and settle on the most competitive one you find in the market. You can also look for reviews online to find out more about the provider.

Compare the initial quotes.

The insurance premium might change over time, but each company will provide you with an initial quote. This is your point of reference and something you can use for comparison. Make sure your comparison is fair, as some companies might provide more benefits in their package. The higher quote might actually be the best value.

Compare the coverage.

Another thing to consider is the coverage provided by the insurance company. Are they asking a fair price for coverage levels they offer? Are other insurance companies providing more coverage at the same cost? What about additional benefits?

Read customer reviews.

What are people saying online? Understanding online reviews is key to figuring out whether an insurance company is reliable. Do people usually applaud their customer service and speak of them in a good light? Are people satisfied with the rates? Yes, you might have to weed through a lot of phony five-star reviews written by the companies themselves, but you can usually spot the real reviews.

Look for additional benefits.

You should avail yourself of all the additional benefits you can find. This means you must look for discounts and find ones relevant to your car model or coverage. Moreover, you can also avail yourself of relevant discounts based on your age or experience.

There are certain benefits you can enjoy simply by being smart. These include setting up automatic payments or bundling insurance policies, such as adding other insurances to the same bundle. You can also bundle more cars or drivers for bigger discounts.

Auto insurance companies are usually known to offer courses where enrollment provides you with a discount. These are safety courses that can benefit you in the future. Be quick on your feet to avail yourself of any discounts offered in time!

Be Smart About Coverage

You don’t need auto insurance for everything that can go wrong. You need to be smart about the decision and consider opting for only the coverage you need. Everything else can come with time.

Start with the minimum coverage your state requires and basic collision coverage. This is great beginner coverage that doesn’t require much investment!

Final Thoughts on Auto Insurance Premiums

At BindRight we understand the value of finding the right insurance company for your coverage. Now that you know the answer to “What is an auto insurance premium?” it's time to search for the best insurer.

BindRight allows you to use our auto insurance search tool and match with an insurance provider that meets your specific goals. Our list of resources can help you make the right decision as a first-time auto insurance shopper.