---
title: "What Is an Insurance Premium? Meaning and Example | Riskado"
description: "An insurance premium is the price charged for coverage, separate from your deductible and claim payments. See a payment example and what changes the amount."
url: "https://riskado.com/insurance-terms/premium/"
lang: "en"
published: "2026-07-29"
modified: "2026-10-01"
image: "https://riskado.com/og/default.jpg"
alternates:
  es: "https://riskado.com/es/terminos-de-seguros/prima.md"
---

# Premium

Updated Oct 1, 2026

An insurance premium is the amount charged for coverage. You, your employer, a government subsidy, or another payer sends it to the insurer on the policy's payment schedule, and paying it keeps coverage in force under the policy terms. The premium is separate from the deductible, coinsurance, copayments, limits, exclusions, and any claim payment.

Also called: insurance premium, monthly premium, annual premium

The premium is the price of the [coverage](https://riskado.com/insurance-terms/coverage/), not a fund for claims and not the most the policy will pay. The amount and due date come from your quote, [declarations page](https://riskado.com/insurance-terms/declarations-page/), bill, policy and [endorsements](https://riskado.com/insurance-terms/endorsement/), and the payer can be you, your employer, a lender, a government [subsidy](https://riskado.com/insurance-terms/premium-tax-credit/) or a premium finance company. The premium is separate from the [deductible](https://riskado.com/insurance-terms/deductible/), which is the part of a covered claim you pay before the [insurer](https://riskado.com/insurance-terms/insurer/) does, according to the [NAIC (opens in a new tab)](https://content.naic.org/consumer/how-does-insurance-work).

## How a premium works in dollars

The [NAIC's 2022 Auto Insurance Database (opens in a new tab)](https://content.naic.org/sites/default/files/aut-db.pdf) reports a combined average auto premium of $1,374.02 for Connecticut. That is a statewide average, not a quote for any one policy, but it shows how a payment schedule works.

Example: a $1,374.02 annual premium paid in six installments

Hover or tap a row to highlight it.

| Item | Amount |
| --- | --- |
| Annual premium (the price for the coverage period) | $1,374.02 |
| Six equal installments ($1,374.02 ÷ 6) | about $229.00 each |
| Total of six payments | about $1,374.00, before rounding or installment fees |

If a premium finance company pays the insurer, you pay the finance company under the finance agreement. The $1,374.02 buys the annual coverage period and is not returned automatically after a claim.

A health plan shows the same separation. In [HealthCare.gov's example (opens in a new tab)](https://www.healthcare.gov/choose-a-plan/your-total-costs/), a $125 covered service after the deductible is met with 20% coinsurance costs you $25 and the plan pays $100. The premium you paid earlier does not remove that $25.

## What changes the amount

- **Payment frequency:** Premiums can be paid weekly, monthly, twice a year or annually, depending on the policy, and more frequent installments can carry billing or finance charges stated in the contract, according to the [NAIC (opens in a new tab)](https://content.naic.org/consumer/how-does-insurance-work).
- **Coverage limits:** Higher limits generally add premium. The [NAIC's state auto table (opens in a new tab)](https://content.naic.org/consumer/auto-insurance.htm) shows Connecticut's required liability limits at 25/50/25 and New York's at 25/50/10, meaning $25,000 per person and $50,000 per accident for bodily injury, and $25,000 or $10,000 for property damage.
- **Deductibles:** A higher deductible generally lowers the premium and raises what you pay on a claim. The size of the change depends on the insurer.
- **Health plans:** [HealthCare.gov (opens in a new tab)](https://www.healthcare.gov/how-plans-set-your-premiums/index.html) says Bronze plans usually have lower monthly premiums and higher out-of-pocket costs, and Platinum plans the reverse. Marketplace insurers may charge up to three times more by age and up to 50% more for tobacco use, and location, plan design and covered dependents also change the premium.
- **Premium tax credits:** An eligible Marketplace enrollee can have the net premium reduced by a credit. [CMS (opens in a new tab)](https://www.cms.gov/newsroom/fact-sheets/plan-year-2026-marketplace-plans-prices-fact-sheet) projected an average 2026 HealthCare.gov premium after credits of $50 per month for the lowest-cost plan for eligible enrollees, which is a projected average and not a universal price.

## Where you will see a premium

Premium appears on auto, homeowners, renters, condominium, life, health and pet policies, and on business policies such as commercial property, general liability, workers' compensation, commercial auto, professional liability and surety. Our guide to [how to get a surety bond](https://riskado.com/how-to-get-a-surety-bond/) covers one business use.

On paper it is the proposed price on a quote, the requested or estimated charge on an application, the temporary price on a binder, and the policy premium or premium by coverage on the declarations page. A renewal notice often shows the expiring premium beside the renewal premium. An endorsement can create additional or return premium, and a cancellation notice can refer to unpaid premium. The [ISO sample HO-3 form (opens in a new tab)](https://www.iii.org/sites/default/files/docs/pdf/HO3_sample.pdf) provides coverage in return for the premium and compliance with the policy provisions.

## What Connecticut and New York change

Both states regulate how unpaid premium can end coverage, though neither changes what a premium is.

In Connecticut, [Conn. Gen. Stat. § 38a-343 (opens in a new tab)](https://www.cga.ct.gov/current/pub/chap_700.htm#sec_38a-343) requires advance cancellation notice. For nonpayment of the first premium on a new policy the notice is at least 15 days, and for nonpayment of another premium it is at least 10 days, with the reason stated. [Conn. Gen. Stat. § 38a-324 (opens in a new tab)](https://www.cga.ct.gov/current/pub/chap_700.htm#sec_38a-324) sets at least 10 days' notice for nonpayment on the commercial policies it covers. Auto and homeowners premiums can rise because of statewide rate changes, inflation, repair costs, catastrophe exposure, rating factors or a lost discount, even with no claim, according to the [Connecticut Insurance Department (opens in a new tab)](https://portal.ct.gov/cid/consumer-information-center/consumer-alerts/2024-consumer-alerts/notice-2024-06-26). Our guide to a [Connecticut homeowners insurance increase](https://riskado.com/connecticut-homeowners-insurance-increase/) covers renewal increases.

In New York, [Insurance Law § 2305 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/2305) requires prior approval for specified rate filings, including private passenger auto, subject to statutory exceptions. Under [Insurance Law § 3425 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/3425), payment to the insurer or an authorized agent or broker is timely for the nonpayment provision if made within 15 days after a cancellation notice for nonpayment is mailed.

## Questions to ask your agent or insurer

1.  What is the total premium for the full policy period, and what is due now? This separates the policy-term price from the first installment, deposit, taxes, fees and financing charges.
2.  What limits, deductibles, endorsements and exclusions come with this premium? The premium buys the coverage in the policy, and the limits and deductible decide what the policy pays and what you pay. Compare options with our guide on [whether insurance is cheaper through an agent](https://riskado.com/is-it-cheaper-to-get-insurance-through-an-agent/).
3.  What would change the premium at renewal, and which changes require notice? Rates, rating factors, coverage changes, lost discounts, location, claims and underwriting information can all move it.
4.  If I pay monthly, are there installment, late-payment or premium-finance charges? The total paid can exceed the stated annual premium.
5.  If I miss a payment, what is the exact cancellation date and how will notice reach me? Nonpayment can end coverage after the policy and statutory notice steps.

## Frequently asked questions

### Does paying the premium mean the insurer pays every claim?

No. The policy pays covered losses, within its limits, exclusions, conditions and deductibles. A marketing label such as "premium plan" or "premium package" does not create a benefit by itself, so check the policy definition, schedule and endorsements.

### Is the lowest premium the lowest total cost?

Not always. Total health-care cost includes the premium, deductible, copayments, coinsurance and out-of-pocket costs, so a lower premium can come with higher costs when you use care, according to [HealthCare.gov (opens in a new tab)](https://www.healthcare.gov/glossary/total-cost-estimate/).

### Is a quote the final premium?

A quote is an estimate based on the information supplied. The issued policy, the declarations page, endorsements and the final underwriting decision set the premium.

### Is premium gasoline related to an insurance premium?

No. "Premium" gasoline is the highest grade by octane, while an insurance premium is money charged for coverage, according to the [U.S. Energy Information Administration (opens in a new tab)](https://www.eia.gov/energyexplained/gasoline/octane-in-depth.php).

## Related terms