Auto Insurance
9 min read

What is the Difference between Auto Insurance Premiums and Deductibles?

Published on
April 15, 2021

What is the Difference between Auto Insurance Premiums and Deductibles?

What is an auto insurance premium?

Auto insurance premium is the payment you make to the insurance company usually every month or every six months for insurance coverage. Paying your premium ensures you are covered for any of the risks detailed in your policy such as liability and collision. Every insurance company has their own criteria for determining your premium.

How are auto insurance premiums calculated?

Companies use the following information about the policyholder to assess their risk behind the wheel:

Personal/Demographics: 

  • Age
  • Marital Status
  • Gender
  • Zip code
  • Educational Level

Credit:

  • Credit history and credit score

Driving history:

  • Points
  • Violations (DUIs)
  • Claims and at-fault accidents

Coverages you select:

  • Liability
  • Collision
  • Comprehensive

Deductible amount: 

  • Low deductible = higher premium 
  • High deductible = lower premium

What main factors increase and decrease your premium?

How your credit affects your car insurance premium

Insurers have come to the conclusion that credit history is correlated with the likelihood of a driver getting into an accident or filing a claim. As such, most insurance companies use credit to determine your rate, so having a lower credit score will negatively affect your premium and thus result in a higher payment. For example, being late on a previous credit card payment or falling behind on your student loan debt can cause your insurance premium to go up.

How your gender affects your car insurance premium

Gender plays a significant role in car insurance costs, on average, young males pay much more for car insurance than young females. Car insurance companies find men to be riskier drivers than women, especially when they are younger. All things equal, women tend to have lower costs to insure their vehicles.

How your zip code affects your car insurance premium

Insurance companies use your zip code as the base for your rate, assessing your riskiness as a driver based on where you drive and park your car. This is because accidents, vandalism and theft are more prevalent in highly populated, urban areas with lots of traffic congestion.

How your age affects your car insurance premium

Companies have determined that younger drivers are riskier and statistically more likely to get into an accident than older drivers. As a result, younger drivers on average pay more for insurance than older, more experienced drivers.

How your level of education affects your car insurance premium

Car insurance companies will take into account your level of education when determining your car insurance premium. According to data and studies done by insurance companies, drivers with graduate degrees file less claims than drivers with just a high school diploma. Therefore all things equal, a driver without an advanced degree may pay a higher auto insurance premium than his more educated counterpart.

How marital status affects your car insurance premium

Your marital or relationship status is also a factor insurance companies use to determine your premium, and being single is not beneficial. Married drivers are seen as more financially stable, safer drivers, and frequently pay less for car insurance. Married couples are often homeowners and will bundle their policies, cover multiple vehicles, and insure more than one driver on one policy.

How driving history affects your car insurance premium

Your driving record is a major factor in determining your insurance premium and studies find that drivers with a clean driving record pay about 40% less than drivers with points or violations on their record. A poor driving record means you don’t qualify for safe-driver discounts and even something as simple as a speeding ticket/violation can cause a 20%-40% increase in you rate.

How coverage types affect your car insurance premium

The type of coverage you buy is a leading factor in how much your premium will be and what kind of protection you have in case of an event. The only insurance coverage that is required by most states to drive your vehicle is Liability. You have the option of adding additional coverage like collision, comprehensive, personal injury protection, or full coverage.

Liability coverage

Required by most states and covers you for the cost of damage and injuries you caused to others in an accident, but not any damage to your car or injury to yourself.

Collision coverage

Is usually not offered on its own and is purchased along with comprehensive insurance. Collision covers you in situations where you are driving and your vehicle is damaged by another vehicle or object, regardless of who is at fault.

Comprehensive coverage

Will pay for repairs in non fender-bender incidents, such as vandalism, theft, and damage from weather, natural disasters, falling objects and animals.

Full coverage

Exactly how it sounds, full coverage includes liability, comprehensive and collision all in one policy and is usuallly required by your lender if you finance or lease.

How the deductible amount affects your car insurance premium

A car insurance deductible is the amount you have to pay out of pocket toward repairs before your insurance covers the rest. Deductibles are either a specific dollar amount or a percentage of the total amount of insurance on the policy. If you’re in an accident that causes $2,000 worth of damage to your car and your deductible is $500, you will only have to pay $500 toward the repair. The insurance company pays the remaining $1,500; usually in the form of a check. If you have a deductible

What is the Difference between Auto Insurance Premiums and Deductibles?

What is an auto insurance premium?

Auto insurance premium is the payment you make to the insurance company usually every month or every six months for insurance coverage. Paying your premium ensures you are covered for any of the risks detailed in your policy such as liability and collision. Every insurance company has their own criteria for determining your premium.

How are auto insurance premiums calculated?

Companies use the following information about the policyholder to assess their risk behind the wheel:

Personal/Demographics:

  • Age
  • Marital Status
  • Gender
  • Zip code
  • Educational Level

Credit:

Driving history:

  • Points
  • Violations (DUIs)
  • Claims and at-fault accidents

Coverages you select:

  • Liability
  • Collision
  • Comprehensive

Deductible amount:

  • Low deductible = higher premium 
  • High deductible = lower premium

What main factors increase and decrease your premium?

How your credit affects your car insurance premium

Insurers have come to the conclusion that credit history is correlated with the likelihood of a driver getting into an accident or filing a claim. As such, most insurance companies use credit to determine your rate, so having a lower credit score will negatively affect your premium and thus result in a higher payment. For example, being late on a previous credit card payment or falling behind on your student loan debt can cause your insurance premium to go up.

How your gender affects your car insurance premium

Gender plays a significant role in car insurance costs, on average, young males pay much more for car insurance than young females. Car insurance companies find men to be riskier drivers than women, especially when they are younger. All things equal, women tend to have lower costs to insure their vehicles.

How your zip code affects your car insurance premium

Insurance companies use your zip code as the base for your rate, assessing your riskiness as a driver based on where you drive and park your car. This is because accidents, vandalism and theft are more prevalent in highly populated, urban areas with lots of traffic congestion.

How your age affects your car insurance premium

Companies have determined that younger drivers are riskier and statistically more likely to get into an accident than older drivers. As a result, younger drivers on average pay more for insurance than older, more experienced drivers.

How your level of education affects your car insurance premium

Car insurance companies will take into account your level of education when determining your car insurance premium. According to data and studies done by insurance companies, drivers with graduate degrees file less claims than drivers with just a high school diploma. Therefore all things equal, a driver without an advanced degree may pay a higher auto insurance premium than his more educated counterpart.

How marital status affects your car insurance premium

Your marital or relationship status is also a factor insurance companies use to determine your premium, and being single is not beneficial. Married drivers are seen as more financially stable, safer drivers, and frequently pay less for car insurance. Married couples are often homeowners and will bundle their policies, cover multiple vehicles, and insure more than one driver on one policy.

How driving history affects your car insurance premium

Your driving record is a major factor in determining your insurance premium and studies find that drivers with a clean driving record pay about 40% less than drivers with points or violations on their record. A poor driving record means you don’t qualify for safe-driver discounts and even something as simple as a speeding ticket/violation can cause a 20%-40% increase in you rate.

How coverage types affect your car insurance premium

The type of coverage you buy is a leading factor in how much your premium will be and what kind of protection you have in case of an event. The only insurance coverage that is required by most states to drive your vehicle is Liability. You have the option of adding additional coverage like collision, comprehensive, personal injury protection, or full coverage.

Liability coverage

Required by most states and covers you for the cost of damage and injuries you caused to others in an accident, but not any damage to your car or injury to yourself.

Collision coverage

Is usually not offered on its own and is purchased along with comprehensive insurance. Collision covers you in situations where you are driving and your vehicle is damaged by another vehicle or object, regardless of who is at fault.

Comprehensive coverage

Will pay for repairs in non fender-bender incidents, such as vandalism, theft, and damage from weather, natural disasters, falling objects and animals.

Full coverage

Exactly how it sounds, full coverage includes liability, comprehensive and collision all in one policy and is usuallly required by your lender if you finance or lease.

How the deductible amount affects your car insurance premium

A car insurance deductible is the amount you have to pay out of pocket toward repairs before your insurance covers the rest. Deductibles are either a specific dollar amount or a percentage of the total amount of insurance on the policy. If you’re in an accident that causes $2,000 worth of damage to your car and your deductible is $500, you will only have to pay $500 toward the repair. The insurance company pays the remaining $1,500; usually in the form of a check. If you have a deductible

You don’t need a good credit score to have great car insurance!

Check out how much you could save today.

Check Our Prices
A weekly newsletter with useful info to help you get to where you’re going.
Subscribe
By subscribing you agree to with our Privacy Policy and provide consent to receive updates from our company.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.