Everything You Need to Know About Car Insurance Premiums

Auto insurance has been around for a long time and can be traced all the way back to 3000 B.C in China where merchants would insure the goods on their boats to protect themselves against the risk of their boat sinking or being hijacked. The first time we see the basic form of auto insurance being used was along the Mediterranean, where merchants and investors would pool their money and charge a premium, which would then be used for those members who had a loss. The first car insurance policy in America was sold in 1898 when cars started becoming more popular. Then in 1927, Massachusetts became the first state to make a law that all driver’s need to have liability car insurance. Flash forward to present day, where all 50 states require every driver to have auto insurance and pay a premium for it.

Mint Green Continental. Car Insurance Premiums

Typically, premiums are paid on a monthly or 3 to 6-month cadence for car insurance. But, what does paying a car insurance premium mean? The very basic definition is an amount of money that you pay an insurance company for maintaining active coverage on your vehicle. The amount you pay is in exchange for the insurance company to take on the risk of insuring you and providing the coverage stated in the insurance company’s policy contract, in case of an accident or loss.

What Determines Your Premium?

The amount of premium you pay is determined in several different ways. The first and most important item is the type and amount of coverage you want. The more coverage you have the most likely the higher premium you’ll pay. Many other aspects also play a role into the total premium, such as what type of car you drive, where you live, your driving record, your credit history, your age, your gender, and marital status.

What Does a Premium Do?

Most insurance companies use your premium to provide coverage for claims being made against the policy you have chosen as long as the claim is under a covered accident that is outlined in the insurance policy contract. At Metromile, you pay your premium monthly. The premium is made up of a low monthly base rate plus a per-mile rate, which is typically a few pennies per mile. We still provide all the same coverages as a traditional insurance company, but charge your premium in a more fair way, based on how many miles you drive. Along with providing coverage in case of an accident, Metromile also provides our customers with a Smart Driving app, that can decode your car’s check engine light, keep you from getting a ticket with street sweeping alerts, and lets you track your trips to look for fuel efficiencies.

How Can You Save Money on Your Premium?

Besides switching to pay-per-mile insurance, you can save money on your auto insurance premium by increasing your deductibles. The higher the deductible amount you have the lower your rates will be. Be sure to weigh your options for what will best fit your lifestyle when choosing your deductible amount.

Most of the time there are discounts that insurance companies offer which can mean more savings in your pocket. Discounts are offered if your vehicle is equipped with certain safety features or alarm systems. A good driving record will also definitely help you save money and usually insurance carriers give safe driver discounts. There may also be discounts for multiple cars on one policy or multiple drivers too. You could even get a discount for being married or being in a domestic partnership. It is always smart to call in and review your options with your insurance company to see what discounts you are already getting and to see if there are any other discounts you qualify for.

If you are a low-mileage driver you should consider switching to pay-per-mile insurance. With pay-per-mile, the premium you pay is based on the actual miles you drive. Traditional insurance may give you a discount for low mileage driving, but at Metromile we offer fair pricing. Once you sign up we send you a device, the Metromile Pulse, which plugs into your vehicle and measures mileage. You’ll pay a low monthly base rate and a few pennies per mile you drive, so each month your bill will vary based on how much you drove. The less you drive, the less you’ll pay. People driving less than 10,000 miles per year can typically see savings in their premium with Metromile. To see how much your monthly premium could be, get a free quote today.