Premium
The recurring payment you make — monthly, quarterly, or annually — to maintain an insurance policy.
Definition
An insurance premium is the amount you pay to an insurance company to maintain your coverage. Premiums can be paid monthly, quarterly, semi-annually, or annually depending on the policy.
Premiums are separate from what you pay when you use insurance (deductibles, copays, coinsurance). You pay your premium whether or not you file a claim — it's the cost of having coverage available.
What determines your premium:
- Health insurance: Age, location, tobacco use, plan type (metal tier), number of people covered
- Auto insurance: Driving record, vehicle type, location, age, credit score (in most states), coverage levels
- Home insurance: Home value, location, age, claims history, coverage limits, deductible chosen
- Life insurance: Age, health status, coverage amount, term length, policy type
How to lower your premium: Increase your deductible, qualify for discounts (multi-policy bundling, safe driver, good student), improve your credit score, maintain a clean claims history, and shop competing insurers every 1–2 years.
Examples
You pay $450/month in health insurance premiums for your family — $5,400/year before using any benefits.
Your auto insurance premium is $180/month. Adding an umbrella policy through the same insurer costs $25/month and bundles for a 10% discount on both.
A 35-year-old in good health pays $35/month for $500,000 in 20-year term life insurance.
Frequently asked questions
Is a lower premium always better?
Not necessarily. A lower premium often means a higher deductible, fewer covered services, or a narrower network. A plan with a $200/month lower premium but a $3,000 higher deductible may cost you more if you actually need care.
What happens if I miss a premium payment?
Most insurers have a grace period (10–30 days depending on policy type). If you miss payment beyond the grace period, your policy can lapse — meaning you lose coverage and any pending claims may be denied.
Do premiums change over time?
Yes. Health insurance premiums change annually at renewal. Auto and home insurance premiums can change based on claims history, driving record changes, or market conditions. Term life premiums are typically locked for the term length.
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