The cost of an insurance premium is largely based on statistics based on the group of people enrolled with you, not necessarily on your individual habits or history. For example: a 22 year old male seeking car insurance for a sports car can often anticipate a higher insurance premium than a 45 year old woman driving a mid-size sedan. While both may have excellent driving records, the insurance company considers a younger driver in a faster car to be more at risk for accidents. Therefore, the insurance premium quotes will be noticeably different. In general, a more expensive or faster car will cost more to insure, simply because owners of those vehicles are known to drive faster.

The same factoring holds true for medical insurance premium costs. Non-smokers statistically live healthier lives than smokers. Construction workers may have more serious on-the-job accidents than someone in a desk job. So this results in a 55 year old lumberjack who smokes being charged a higher health insurance premium than a 30 year old non-smoker who is working in an office. However, an insurance premium may be reduced if the policy holder does change his or her habits and lifestyle.

An insurance premium is generally collected in monthly, quarterly, bi annual or annual payments. It is important to understand that if the policy holder fails to make a scheduled payment, the insurance company can choose to cancel the policy entirely. This is referred to as a "lapsed policy". Either the customer will have to pay the balance of the insurance premium and become reinstated or the policy will become null and void. Because the billing cycle may be lengthy, it is not unusual for policy holders to forget to make a payment before the policy lapses.

An insurance premium can be in a state of flux. Rates may go up or remain stable between billing cycles. An accident claim can dramatically increase the insurance premium rate of the claimant, especially if the accident report shows the policy holder was at fault. Because of this state of flux that premiums can be in you can often save considerable amounts of money by paying your premiums at least quarterly. While your rates still may go up the insurance company will often charge you less due to the lessoning of paperwork, filing and billing that are required for those people who pay their insurance monthly. In addition many insurance companies charge you a monthly service fee if you choose to pay your bill that way. Paying your bill quarterly can get rid of that fee saving you considerable amounts of money over the course of a year. Major insurance companies often charge a $5-10 dollar monthly service fee for those paying their insurance bills every month. Not having to pay this fee automatically puts $60-120 dollars per year in your pocket.