Car insurance premiums may sound like a technical part of your agreement, but it is simply the total cost you will pay for your policy.
In this guide, we look at what it means for drivers, and what can impact the price you get every year.
Car insurance from £232, that's what 10% of customers pay^
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^10% of new customers paid £232 or less for RAC Online Car Insurance, from rac.co.uk between 01/08/24 & 20/08/25. Annual base premium; excludes optional extras and finance.
^10% of new customers paid £232 or less for RAC Online Car Insurance, from rac.co.uk between 01/08/24 & 20/08/25. Annual base premium; excludes optional extras and finance.
What does insurance premium mean?
A car insurance premium is the total amount you will pay your insurance provider for coverage of your vehicle.
It can be paid either monthly, yearly, or in instalments.
By paying for your policy, the insurer will agree to cover certain risks, such as accidents and damages to the vehicle, or if you get injured during an incident.
The premium can change due to the different type of agreement, as the type of insurance, your own risk level, coverage amount, location, claims history, type of vehicle, and several other factors impact the final price you will pay.
How to pay for my car insurance premium?
When it comes to paying for your car insurance premium, there are some very simple ways of doing it.
The first is to set up an annual or monthly direct debit. This will automatically pay when it is needed and is the most common method.
Remember to set a reminder of when the policy is due to end, so you can try and negotiate a better deal for yourself.
For reference, an annual payment is usually cheaper, due to you not being charged interest, as you would be when paying by instalments.
You can also use a debit or credit card if you are looking to do a one-off payment.
Both of these options will need to be set up directly with the provider you are purchasing your cover from.
Before paying, you may need to provide your personal details and driving licence number, as well as the necessary details about the vehicle and your driving history.
Each policy is different, so you will need to update or confirm your policy details.
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Whether you’re a new driver or just looking to reduce costs, we can help.
Have car insurance premiums gone up?
According to the Association of British Insurers IABI), the average cost of an insurance premium rose by £8 in the final quarter of 2025.
There are several potential reasons for this, including higher repair costs, ongoing supply chain issues, rising labour costs, and more claims being made (due to the comparison to Covid years).
What is car insurance excess?
Your car insurance excess is the total amount of money that you will contribute if you make a claim – and the insurer will pay the remaining costs.
There are two different types:
Compulsory excess
This is the fixed amount your insurer requires you to pay if you make a claim with them as this is settled as a fault claim.
You cannot change this amount, and it is usually based on factors like your age, driving experience, and the type of car you drive.
Voluntary excess
When it comes to voluntary excess, this is an additional amount you choose to pay on top of the compulsory excess to potentially help lower your insurance premium.
By choosing a higher voluntary excess, it can reduce your monthly or annual costs, but it also means you’ll pay more out of your pocket if you make a claim.
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*T&Cs apply. †At least 10% of new customers pay this for single-vehicle Roadside (Basic). ^Find the same cover cheaper with the AA within 7 days & we'll beat it by 20%. T&Cs here.
*T&Cs apply. †At least 10% of new customers pay this for single-vehicle Roadside (Basic). ^Find the same cover cheaper with the AA within 7 days & we'll beat it by 20%. T&Cs here.
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