Premium
The recurring payment you make, monthly, quarterly, or annually, to maintain an insurance policy.
Last reviewed August 23, 2026
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
What moves a premium: The deductible you choose, discounts you qualify for (multi-policy bundling, safe driver, good student), credit history where state law allows it, and claims history. Which of those you can act on, and whether you would want to, is a conversation for your carrier or a licensed agent.
Premiums are easiest to compare when every policy is in front of you at once. Household insurance in one afternoon covers how to gather them.
Examples
You pay $450/month in health insurance premiums for your family, which is $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.
Two policies with the same premium can carry different deductibles, limits, and exclusions. The premium alone does not tell you which is which.
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.
Related terms
Deductible
The amount you pay out of pocket for covered services before your insurance begins to pay.
Out-of-pocket maximum
The most you'll ever pay in a plan year for covered services, after which your insurance pays 100%.
Copay
A fixed dollar amount you pay for a specific healthcare service, like $25 for a doctor visit, regardless of the total bill.
Coinsurance
The percentage of costs you share with your insurer after meeting your deductible, for example, you pay 20%, your insurer pays 80%.
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