Parents and child in a car on the road

What Is a Car Insurance Premium?

Updated January 18, 2024 . AmFam Team

A car insurance premium is the amount you pay your auto insurance company for an active policy. In exchange, the company delivers financial protection in the event of an accident. Most insurers let you make payments on premiums, but you can also pay once a year.

Your vehicle type, coverage amount and driving record affect your cost. Though, you might qualify for discounts. Learn how premiums are determined and how to get quality car insurance at a great price.


Two cars after a collision


Car Insurance Premium Basics

Even a minor accident can be expensive. That’s especially true if you’re the one who caused it. If you’re at fault, you’re responsible for the costs associated with fixing your car. You’re also responsible for others’ hospital bills, property damages and lawsuits.

When you have car insurance, your insurer helps you cover all or a portion of those expenses. The amount the company pays depends on your chosen deductible and coverage amounts.

Your insurer takes a risk by agreeing to protect you in the event of an accident. In exchange, the company charges you a car insurance premium. The amount you pay depends on how big of a financial risk you are to the insurer.


Parents with their children in the front yard


How Car Insurance Premiums are Calculated

There are 11 primary factors that help insurance companies determine the cost of your car insurance premium.

  • Age: Young drivers are riskier to insure than more experienced drivers.
  • Driving record: Insurers look for speeding tickets, prior accidents and other vehicle-related violations.
  • Driving history: Someone with many years of driving experience and a clean record is less risky.
  • Credit score: Drivers with a lower credit score tend to file more claims than those with good credit.
  • Coverage level: Too much coverage can result in a higher car insurance premium.
  • Location: Where you live influences your risk for accidents, theft and vandalism.
  • Vehicle type: The make and model of your car affect its likelihood of theft, repair costs and your safety.
  • Driving frequency: Your daily commute helps insurers learn more about your accident risk.
  • Other drivers: Having others on your policy can increase your car insurance premium.
  • Discounts: Some car insurance companies offer deals for certain types of drivers. For example, we offer discounts for loyal customers, young drivers and safe drivers.*
  • Deductible: Selecting a deductible that is too low can increase your car insurance premium.

Contact an American Family Insurance agent to learn more about our wide range of discounts.


Woman in a car garage


What Is a Car Insurance Deductible?

Your deductible is the portion of the bill you pay out of pocket when you file a claim. For example, let’s say you’ve chosen an annual deductible of $500. If you scratch your bumper and it costs $600 to fix it, your car insurance company should contribute $100 to the bill.

A low annual deductible gives you the most financial protection in the event of a covered loss. However, it increases your car insurance 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.


Child running to greet her father


Can You Get a Discount on Your Car Insurance Premium?

There are several ways we can help you save on your car insurance premium.* Consider these six discount categories as you shop.

  • Billing: Get a discount for choosing a better way to pay your car insurance premium. Consider going paperless, paying in full or enrolling in autopay.*
  • Safe driving: We reward smart driving habits with savings.**
  • Young driver: Getting good grades or volunteering can earn younger drivers discounts.*
  • Loyalty: Customers who have been with us for a while could have savings that apply to them.*
  • Bundling: We offer deals for adding another insurance policy to your coverage with us.*
  • Diminishing deductible: While it won't lower your premium, you can save money with our diminishing deductible endorsement. It rewards claim-free customers with a $100 yearly credit toward your deductible, up to $500.***

Learn more about your eligibility for discounts by getting a customized quote online. You can also reach out to an American Family Insurance agent.

Car Insurance Premium FAQs

How often is your car insurance premium due?

Most insurers allow you to pay your premiums monthly, every six months or annually.

How do you pay your car insurance bill?

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

What is a car insurance quote?

A quote is a car insurance premium estimate. It's based on the information you provided on your application. That estimate could change once your car insurance agent confirms your details. What could increase your car insurance premium? It might increase if you change one or more factors influencing your existing car insurance premium, such as getting a speeding ticket.

Parents and kids having fun in a car

Get a Car Insurance Quote from American Family

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

*Discount and savings amounts and product eligibility will vary by state, property type, policy form and company underwriting the auto and/or homeowners policy. Discounts may not apply to all coverages on an auto or property policy. Discounts do not apply to a life policy. Some restrictions may apply.

**Good Driving discounts are based on a variety of factors, including location and policy. While the Good Driving discount program isn’t available in Oregon, we provide Good Driver discounts right into your policy.

***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.

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