Sometimes, it’s important to understand insurance terms. While the car insurance industry strives to be clear, not all the terms they use are encountered in everyday life, and some of the terms mean different things in the insurance industry than they do elsewhere.

One of these terms is “premium.” A premium is how much an insured person or business pays for insurance, whether it’s monthly, quarterly, or yearly.

In other words, if you are paying $1,800 per year for car insurance and are paying monthly, the premium is the $150 that you pay monthly.

How Premiums Are Calculated

It’s important to know, also, how your car insurance company arrives at the premium. Once you know the factors that contribute to the premium, you can manage it as part of your finances.

Your insurance company is primarily interested in the how likely you are to file a car insurance claim. Claims cost them money, and they charge accordingly. If you have a poor driving record, for example, with several accidents, your insurance premiums are very likely to go up. People younger than 25 are very likely to be charged higher premiums because statistically, younger people have more accidents than older ones.

The following factors are among those the insurance company considers in calculating your premium:

  • Your age (people younger than 25 are likely to be charged more)
  • Your driving history
  • The make and model of your car (these are done by statistical probability; owners of sporty models are likely to be charged higher premiums)
  • Your average mileage driven per year
  • Area where most of your driving is done (state, city; urban, suburban, or rural area)

Financial Management of Your Insurance Premiums

Now that you know some of the factors insurance companies look at, it becomes easier to manage the amount you pay in premiums to some degree.

If you have a driving history that’s only fair or poor right now, for example, work to change it. The safer your driving record becomes, the better it will be for your insurance premiums. It is also a good idea to take a defensive driving class. Many insurance companies offer discounts to people who do that.

The more you know about insurance, the better deal you will be able to get on premiums.


If you would to like to discuss your options for car insurance please call us at 561-732-9305 our quoting hours are Monday through Friday from 8:30 AM to 5:30 PM. In addition, you can request a quote online. Please remember, We Handle All the Work, While You Save!