What is a car insurance premium?

Every time you buckle up and hit the road, you begin a journey — whether it’s chasing life’s everyday moments or the exciting, new adventures ahead. But what helps keep those excursions worry-free? Insurance — and that’s where your car insurance premium comes in.

An auto insurance premium is the amount you pay to keep your policy active. In exchange, your insurer provides financial protection if you’re in a covered accident. It’s the key to unlocking support, security, and the freedom to focus on what matters most: enjoying the ride.

At American Family insurance, we believe it’s important for drivers to understand their premium — how it’s determined and how to get quality coverage at a great price. Let’s break it down together.

Car insurance premium basics

Owning and operating a vehicle can be expensive — especially if you’re in an accident. And if you caused it, you’d be responsible for the cost of your own injuries and damages, as well as those of your passengers and others involved in the collision.

That’s why having car insurance is so important. For a covered accident, your insurer assists with these expenses — the amount depends on the coverages, deductibles, and policy limits you select.

By agreeing to protect you in this way, your insurer takes a risk. In exchange, the company charges you a car insurance premium. The amount you pay is determined by how much of a financial risk you present.

Let’s take a closer look at what factors into your auto insurance premium.

How car insurance premiums are calculated

No two drivers are the same, and your premium reflects that. Here are some of the key variables that influence the cost of your car insurance premium:

• Age and driving experience: Newer drivers tend to pay more, while experienced drivers with clean records often pay less.
• Driving record: Speeding tickets, prior accidents, and other vehicle-related violations can increase your premium.
• Credit score: Insurers may consider your credit history when determining your rate since drivers with a lower score tend to file more claims.
• Coverage level: More coverage usually means a higher premium.
• Location: Your location influences your risk for accidents, theft, and vandalism.
• Vehicle type: The make and model of your car can impact repair costs and safety ratings.
• How often you drive: Daily commuters may pay more than occasional drivers.
• Other drivers: Adding drivers to your policy can change your premium.
• Discounts: Some insurers offer deals for certain types of drivers. American Family offers discounts for loyal customers, young drivers, safe driving habits, and more.*
• Deductible: Selecting a lower deductible can increase your premium.

Want to know more about discounts? Reach out to your American Family Insurance agent — we’re here to help you save.

What’s a car insurance deductible?

Your deductible is the amount you pay out of pocket when you file a claim. For example, say you have a $500 deductible. If you scratch your bumper and it costs $600 to fix it, your car insurance company could help cover the remaining $100.

Keep in mind, a low annual deductible gives you more financial protection in the event of a covered loss. However, it typically means you’ll pay a higher premium because it's riskier for your insurer.

If you’re unsure which deductible is right for you, our agents can help you select the best one for your budget.

Are discounts available on car insurance premiums?

Absolutely! We offer several ways to help you save.* Consider these six discount categories as you shop:

• Billing: Go paperless, pay in full, or enroll in Autopay for possible savings.*
• Safe driving: Smart driving habits could lead to lower rates.*
• Young driver: Getting good grades or volunteering may qualify younger drivers for discounts.*
• Loyalty: Long-time customers may be eligible for savings.*
• Bundling: Add another policy (like homeowners or renters) for a multi-policy discount.*
• Diminishing deductible: It doesn’t lower premiums, but our diminishing deductible endorsement rewards claim-free customers with a $100 yearly credit toward their deductible, up to $500.**

Get a customized quote online or connect with your American Family Insurance agent to explore your discount options.

Car insurance premium FAQs

How often do I pay my car insurance premium?

Most insurers let you pay monthly, every six months, or annually.

How do I pay my bill?

With American Family Insurance, you can pay through the MyAmFam app, online, or by phone. You can also sign up for Autopay and save.

What’s a car insurance quote?

It’s an estimate of your premium based on your application details. Your final rate could change after your agent confirms your information.

What could increase my premium?

Changes like getting a speeding ticket or adding a driver can affect your rate.

Ready to get started?

Contact an American Family Insurance agent or get an online quote today to start saving on your car insurance premiums.

*Discount, savings and product eligibility varies based on the way you purchase insurance, by state, property type and policy form. Discounts may not apply to all coverages on an auto or home policy. Discounts do not apply to life policies. Exclusions may apply.

**Deductible will be credited $50 for 6-month policy terms and $100 for 12-month policy terms. Available at renewal for existing policyholders. Please speak with your agent to learn more about your coverage options.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

This information represents only a brief description of coverages, is not part of your policy, and is not a promise or guarantee of coverage. If there is any conflict between this information and your policy, the provisions of the policy will prevail. Insurance policy terms and conditions may apply. Exclusions may apply to policies, endorsements, or riders. Coverage may vary by state and may be subject to change. Some products are not available in every state. Please read your policy and contact your agent for assistance.