Insurance premium

An insurance premium is what you pay to keep your policy active. It can be billed monthly, quarterly or annually, and the amount depends on your coverage and risk profile. Whether it’s for auto, home, renters or life insurance, your premium confirms that your coverage stays in effect, so you’re protected if something unexpected happens.

Why do insurance premiums matter?

Your premium isn’t just a bill; it’s the price of staying insured. If you don’t pay your premium, your coverage may lapse, which means your insurance company may not cover future claims. Missing payments could leave you unprotected when you need coverage most.

How do insurance premiums work?

When you buy an insurance policy, your insurance company calculates your premium based on your risk level, location and the coverage you choose. Insurance companies pool all the premiums they collect to pay out future claims. In exchange for your premium, the insurance company promises to cover specific losses, like damage, theft or liability, according to your policy terms.

How much are insurance premiums?

Premium amounts vary widely depending on several factors, and no two policies are exactly alike. The cost of your premium reflects your specific risk level, the amount of protection you choose and even where you live. Understanding what drives premium pricing can help you make smarter decisions when choosing coverage:

• The type of insurance (e.g., auto, home, life)
• The amount of coverage you choose
• Your risk profile (driving history, claims, credit score, etc.)
• Where you live
• The deductible amount on your policy

If you're seen as a higher risk, your premium will likely be higher. Maintaining a good credit score is important because it can help keep your premiums lower.

Here are a few examples of average premiums:

• $15 to $30/month for renters insurance
• $1,500/year for homeowners insurance
• $100 to $200/month for auto insurance
• $20 to $50/month for life insurance

The impact of insurance deductibles

Your deductible is the amount you pay out of pocket before your insurance covers the rest of a claim. A higher deductible usually lowers your premium. A lower deductible increases your premium but reduces out-of-pocket costs when you file a claim.

Premium billing options: monthly vs. annual

Most insurance companies give you a few ways to pay your premium, so you can choose what works best for your budget. Some people prefer smaller monthly payments, while others like the simplicity of paying once or twice a year. Here are the most common billing options:

• Monthly – This type of billing is easier to budget but may include small fees.
• Annual or semi-annual – This billing cycle often includes a small discount.
• Autopay or paperless billing – You can do this for any billing period. It may offer additional savings.
• Lump sum – This means paying the entire premium upfront before coverage starts.

How do you pay insurance premiums?

Paying your premium should be simple, and most insurance companies offer several convenient options. Whether you prefer the ease of autopay or the control of manual payments, there’s likely a method that fits your routine. You can usually pay by:

• Credit or debit card
• Bank transfer (ACH)
• Mailed check
• Online account portal
• Autopay from your bank account

Make sure to pay by your due date to avoid a lapse in coverage.

What happens if you miss a premium payment?

If you miss a payment, don’t panic, but don’t wait too long either. Most insurance policies offer a short grace period, usually between 10 and 30 days, to catch up on your payment without losing coverage. After that window closes, you could face a policy lapse and potentially higher premiums when you reinstate or reapply.

It’s best to contact your insurance provider or VIU by HUB Advisor immediately if you think you’ll miss a payment.

What’s the difference between insurance premiums and other out-of-pocket payments?

Your premium is what you pay to keep the policy active, but it’s not the only cost you might face. Depending on the type of claim or policy, you may also have out-of-pocket costs when you need to use your insurance. These can include things like deductibles or expenses beyond your coverage limits:

• Deductibles – This is the amount you pay before your insurance starts covering a claim. You may need to pay a deductible each time you make a claim, except for life insurance.
• Copays or coinsurance – These are shared costs you pay when you receive covered services, and they are most commonly found in health insurance plans.
• Expenses above your coverage limits – These are any costs that go beyond what your policy will pay, and you’re responsible for covering the difference.

Types of insurance premiums

Not all insurance premiums work the same way. Some stay consistent over time, while others can change based on your risk profile or market conditions. Understanding the structure of your premium can help you budget and plan more confidently. Depending on the type of policy, premiums may be:

• Level – This premium stays the same for the life of the policy, which is common in term life insurance and whole life insurance.
• Variable – This premium changes at each renewal based on updated risk factors assessed by the insurer.
• Guaranteed – This premium is fixed for a certain period, offering predictable costs for that duration.

Your VIU by HUB Advisor can help you understand which type applies to your policy.

What determines an insurance premium?

Your insurance company sets your premium based on your personal risk factors, like your claims history, location or credit score. These details help insurance companies assess how likely you are to file a claim, which in turn affects what you’ll pay. The more accurately your insurance company can evaluate your risk, the more precisely they can price your premium. What factors do they consider?

• Risk rating algorithms
• Underwriting guidelines
• Market trends and inflation
• Your individual information (credit, claims history, property value)
• The overall claims experience in your risk pool

Rates can also vary based on your location or how many policies you bundle.

What is a premium quote?

A quote is an estimate of what your premium will be based on the information you provide. It’s not final and your actual premium may change after underwriting reviews your full profile. To get an accurate quote, be ready to share:

• Your address
• The item you want to insure (car, home, etc.)
• Claims or driving history
• Your desired coverage and limits

Accurate information helps ensure a more accurate quote.

Can premiums change after a claim or renewal?

Yes, your premium may vary based on several factors, even if you haven’t changed your coverage. Things like filing a claim, adjusting your limits or shifts in inflation can all impact your rate. Here's when you might see a change:

• You file a claim
• Your coverage limits change
• Your credit or risk profile changes
• Inflation increases costs (construction, medical bills, etc.)
• You bundle or remove policies

Premiums are typically recalculated at each renewal period.

What factors affect car insurance premiums?

Car insurance rates vary depending on your personal habits, the car you drive and where you live. Insurance companies consider how likely you are to have or cause an accident and how much it might cost to repair or replace your vehicle. Key factors include:

• Driving history and past claims
• Age, gender and location
• Vehicle make, model and year
• Credit score and mileage
• Discounts (safe driver, anti-theft, bundling)

For example, younger drivers in cities usually pay more due to higher accident risk.

What factors affect homeowners insurance premiums?

Homeowners insurance pricing depends on the property’s features and the surrounding risks. Insurance companies consider the home’s age, rebuild cost and even the local weather. Important premium factors include:

• Home value and rebuild cost
• Age and condition of the home
• Local weather or disaster risks
• Security systems or fire protection
• Claims history

Larger or older homes in higher-risk areas often come with higher premiums.

What factors affect renters insurance premiums?

Renters insurance premiums vary depending on several factors, and understanding them can help you make smart choices about your coverage. Where you live, how much protection you need and whether you’ve filed claims before can all affect the price. Here are some of the most common things that impact renters insurance costs:

• ZIP code or building risk
• Coverage limits and deductibles
• Past claims
• Bundling discounts with auto or other policies

What factors affect life insurance premiums?

Life insurance premiums are based on both who you are and the type of coverage you choose. Factors like your age, health and smoking status all influence how much you'll pay, along with whether you opt for term or whole life coverage. Understanding these details can help you choose a policy that balances cost with peace of mind:

• Age, gender and health history
• Smoking status
• Type of policy (term vs. whole life)
• Coverage amount and duration

Your current health and medical history can significantly affect your premium.

How can I lower my premiums?

Lowering your insurance premiums isn’t always easy, but it is possible with a few smart moves. The key is finding ways to reduce your perceived risk or reward long-term good habits. You might reduce your premiums by:

• Bundling multiple policies
• Improving your credit
• Installing safety or security features
• Completing defensive driving or home inspection programs
• Raising your deductible
• Avoiding small claims

Shopping around with different insurance companies (or working with a broker) can help you find the best price. Ask your VIU by HUB Advisor to help uncover available discounts.

What is an actuary?

An actuary is a professional who analyzes risk and helps insurance companies determine the financial cost of uncertainty. They use statistics, modeling and historical data to calculate premiums that are fair and sustainable. Without actuaries, insurance companies wouldn’t know how to price coverage accurately.

Insurance premium FAQs

Is my premium the same as my deductible? 

No, your premium is what you pay regularly, usually monthly or annually, to keep your insurance policy active. Your deductible is the out-of-pocket amount you’re responsible for paying when you file a claim before your insurance coverage applies. In short, your premium keeps you insured, while your deductible only matters if you need to use that insurance.

Why did my premium go up if I didn’t file a claim? 

Premiums can increase due to factors outside your control, such as inflation, rising repair or medical costs or changes in local risk conditions. Insurance companies also adjust rates based on overall claim trends in your area, even if you personally haven’t filed one. This means your premium reflects both your individual profile and broader market conditions.

Do I have to pay my whole premium upfront? 

Not always, since most insurance companies provide flexible payment options. Depending on your policy, you may be able to spread payments out monthly, quarterly or semi-annually instead of paying the entire amount at once. Some companies may even offer a discount if you choose to pay the full premium upfront.