Premium
What you pay for the policy, usually shown per 6-month or 12-month term.
A premium is the price of a policy for a set stretch of time. Auto policies are commonly written for six months; home and renters policies usually run twelve. The figure on the declarations page is the price for that whole policy period, not a monthly amount.
Premium is built during underwriting, where an insurer applies its filed rates to the details of the risk. Those details typically include the coverages and limits selected, the deductible, the vehicle or the home itself, where it is kept, claim history, and in many states a credit-based insurance score. Which factors are allowed varies by state.
The premium is not always the whole bill. Many insurers add a policy fee, an installment fee each time the premium is split into monthly payments, and in some states charges that fund state programs. Paying a term in full generally avoids the installment fees, and the trade is that the whole amount comes due at once.
Premiums move at renewal even when nothing about the household changed. Insurers refile rates as repair costs, medical costs and claim patterns shift across an entire state, so a renewal figure can rise or fall on its own. A surcharge after an at-fault accident or violation is a separate, individual increase layered on top of that.
When a premium goes unpaid, the insurer generally issues a cancellation notice, and coverage typically runs through a grace period whose length depends on state law and the carrier. The lapse that follows can affect pricing later. On a mortgaged home the premium is often paid out of escrow instead of directly.
In real life
A renewal notice shows $1,284 for a twelve-month homeowners policy. The homeowner picks monthly billing, so the insurer splits it into twelve payments of $107 and adds a $5 installment fee to each — $60 more across the year. Nothing about the house or the coverage changed. The entire difference comes from how the premium is paid.
Common questions
Is an insurance premium the same as a monthly payment?
No. The premium is the full price for the policy term, usually six or twelve months. A monthly payment is that premium divided into installments, often with a small fee added to each one. Two policies with the same monthly payment can carry very different premiums if one runs on a six-month term and the other on twelve.
Why did my insurance premium go up when I didn't file a claim?
Renewal pricing reflects more than one household. Insurers periodically refile rates with a state as repair costs, medical costs, vehicle values and storm losses change across the whole book of business. Other common causes are a discount that expired, a driver or vehicle added, a roof aging into a different band, or a change in the coverage itself.
What happens if I don't pay my insurance premium?
The insurer generally sends a cancellation notice with a deadline, and most states set a minimum amount of warning. Coverage typically stays active until that stated date and ends if payment does not arrive. The gap that follows is called a lapse, which insurers commonly treat as a pricing factor when the next policy is written.
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Scan my policy — freeRelated terms
Definitions describe how these terms are generally used across the U.S. market. Wording, limits and exclusions vary by insurer, policy form and state — the policy you hold is what controls. See the full Insurance Glossary.