Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 26, 2020

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Key takeaways...

  • The premium that your car insurance provider charges are a calculation of the risk exposure you present to them
  • You can typically pay for a car insurance policy in a variety of installment plans
  • Actually paying for your car insurance policy can typically be done online, via paper check, or through smartphone applications


Shopping for a car insurance policy can be a confusing process, to say the least. You are always looking to find value in the policy that you are going to buy.

One of the more common questions that consumers have when it comes to their policy is what they are actually paying for.

When you are charged a price for the policy, are you paying for the customer service, for the coverage, are you pre-paying for a loss that has not happened yet?

It really is a combination of all of that which is tied to one concept: the premiumCompare car insurers side-by-side and get the best deal for your coverage needs.

Table of Contents

Paying the Premium

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When you buy a car insurance policy, what you are paying out of your own pocket in exchange for that policy is known as the policy premium.

The premium is basically the price that you are going to pay to get coverage bound for the policy period from the insurer.

Think about the premium as a payment that you are making in return for the coverage that you are actually buying.

The premium is a calculated dollar amount that an insurance carrier generates based on a lot of factors. Here are some of those factors:

  • All of the drivers that are going to be included on the policy
  • Driving records
  • Vehicles that are going to be covered
  • Where you live

From there, they are pricing your policy based on the risk that you present. In the event that you are considered to be a higher risk to the insurer, you are going to be paying a higher premium.

If you have a history of accidents for example and you are driving a brand new car, you will be paying a higher premium than someone with an older car and a perfect driving record. This is because the risk exposure of a major loss in the second driver is much lower.

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The Standard Payment Plans Available

The typical payment plans that you are going to see available to you from most insurance carriers will start with you making an initial deposit. This is usually just going to be a payment that is equal to one-month of the insurance premium.

Once you make that deposit, the coverage is going to be bound. Most insurance carriers will then offer you options to pay the premium in one of the following ways:

  • Monthly
  • Quarterly
  • Semi-annually
  • One lump sum payment each year

Shop around in the market to get payment terms that are going to be favorable to you and what you are comfortable with.

Paying the Insurer

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You can usually pay your insurer in a variety of ways as well. Most insurance carriers now allow you to pay for your car insurance policy electronically right on their websites.

You also may be able to enroll in an automatic payment option so that the money gets withdrawn monthly from your bank account. Paper bills are also usually going to be available.

The other option that now exists more than ever before is smartphone apps, allowing you to manage and pay for your policy right on the app of the insurer.

As a consumer, you always want to do price comparisons when trying to figure out which is the best insurance carrier to go with for your auto policy.

Now that you know where your money is going when you are paying your car insurance provider, figure out where you are going to get the most value for that premium that you are paying.

Find that perfect balance in terms of the premium dollars you are being charged in exchange for the customer service and coverage you are receiving in return.

When you do this you are going to be able to end up with a car insurance policy that you are comfortable and confident in keeping you and your family safe.

Compare quotes today by using our free rate tool!

References:

  1. http://www.autotrader.com/car-shopping/buying-a-car-what-factors-affect-your-car-insurance-rate-246708
  2. https://www.progressive.com/auto/
  3. http://money.usnews.com/money/personal-finance/articles/2013/10/04/decoding-the-mysteries-of-high-risk-car-insurance
  4. https://www.geico.com/web-and-mobile/mobile-apps/
  5. http://www.consumerreports.org/cro/news/2015/08/top-car-insurance-companies-that-wont-break-the-budget/index.htm