Glossary
Premium, defined
The price you pay to keep a policy in force, billed monthly, every six months or once a year. The insurer sets it from the risk it is taking on: what is covered, the limits and deductible chosen, where the property or vehicle is, and the record of the people insured.
In practice
The premium is the trade-off side of every other choice on a policy. Raising a limit or adding an endorsement moves it up; taking a higher deductible or dropping an optional coverage moves it down. Paying in instalments often adds a service fee, so the annual figure on the declarations page is not always what leaves your account over the year.
Missing a payment starts the grace period; if the grace period passes unpaid, the policy lapses and the coverage stops.
A worked example
Suppose a driver's six-month premium is $600. Paying it in one lump sum costs $600. Paying it monthly at $100 plus a hypothetical $5 instalment fee each month costs $630 for the same coverage. Choosing a higher collision deductible on the same policy might bring the six-month figure down; the exact change depends on the insurer's rating and is not a fixed amount. All of these numbers are illustrative only.
Applies to: Auto Insurance