A premium is the price you pay to buy an insurance policy. Premiums are your regular payments for many common insurance policies, including life, auto, business, homeowners and renters. If you fail to pay your premiums, you risk having your policy canceled. Most people pay their premiums monthly, but you may save money by paying for the whole year up front or choosing a semi-annual premium.
How premiums are calculated varies, starting with the type and amount of coverage you select. When you were shopping for coverage, did you specify the same exact coverage with both insurers for an apples-to-apples comparison? If you chose a lower deductible or higher limits with one insurer, that could explain the difference in your premium quotes.
Auto insurance premiums also typically take into account your driving record, how much you drive, how much coverage you select and where you live, among other factors. Life insurance premiums typically factor in your age, health and life expectancy, along with the coverage limits you choose.
The deductible you pick also typically affects your premium, depending on the type of policy. Your deductible is the amount you must pay toward the costs of an insured loss — say a car crash or home fire — before your insurance company makes a payment. With most home or auto insurance policies, choosing a higher deductible can lower your premium costs.
The information contained in this page is provided for general informational purposes only. Read our editorial standards for Insurance Questions and other content. We make no representations or warranties of any kind, express or implied. This does not refer to any specific insurance policy and nothing herein is intended to replace or modify any terms in your actual policy.
Farmers may also provide information on topics that are not directly about insurance policies or coverage that we believe could be helpful to you. Information in such articles is not meant as professional advice, and any reliance you place on such information is therefore strictly at your own risk.
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