Insurance Rate vs. Premium: What’s the Difference?

By Brad Davis, CIC (October 8, 2025)

When you look at your insurance bill or quote, you’ll see a few different numbers — the rate, the premium, and sometimes a few fees, surcharges, or discounts.

A lot of people assume “rate” and “premium” mean the same thing. But they don’t — and understanding the difference can help you make sense of why your insurance costs what it does (and what you can do about it).

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Rate = The Price Per Unit of Exposure

The rate is what the insurance company charges per unit of exposure — or in simpler terms, the price applied to the thing being insured.

Each type of insurance uses a different rating factor, such as:

• Home Insurance: dwelling value or coverage amount

• Auto Insurance: type of vehicle and driving history

• Workers Compensation: payroll

• General Liability: annual revenue or square footage

Rates are usually expressed as a dollar amount per $100 or $1,000 of the rating basis.

For example:

     A Workers Compensation policy might have a rate of $0.10 per $100 of payroll.

     If your business has $450,000 in annual payroll, here’s the math:

     $450,000 ÷ 100 = 4,500 × $0.10 = $450 base premium

That $0.10 is the rate, and it’s what the insurance company uses to calculate the starting point of your premium.

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Premium = The Final Cost of the Policy

The premium is the amount you actually pay for coverage.

It starts with the base calculation (rate × exposure), but then additional factors come into play, such as:

• Policy fees or expense constants

• Credits or discounts (e.g., multi-policy, claim-free, protective devices)

• Surcharges or state taxes

• Experience mods or underwriting adjustments

• Coverage selections and optional endorsements

So the rate builds the foundation, but the premium is the final cost after all these items are factored in.

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“I Got a Better Rate From Another Agent” — Not Exactly

Here’s a common misconception we hear all the time:

     “I got a better rate from another insurance agency — with the same company!”

While that sounds right, it’s not technically true.

For the majority of insurance companies, especially admitted carriers in South Carolina, rates are filed with and approved by the South Carolina Department of Insurance. That means the rate itself cannot change from one agent to another for the same risk.

*You can visit the SC DOI if you want to read more about Rates, Rules, and Forms Filings for Property & Causalty Insurance.

So, if two agencies are quoting the same carrier (say, Travelers or Safeco) and the same property, the rate is identical.

What can differ is the premium — because of factors like:

• One agent included or excluded certain coverages (e.g., Water Backup, Personal Injury, or Service Line coverage)

• One quote included additional discounts or credits the other did not

• Rating information (like year built, roof type, or square footage) was entered incorrectly

• One quote used replacement cost value that differs from what the home should actually be insured for

These details can easily cause one premium to look higher or lower — even though the rate behind the scenes is identical.

What’s important to note is that it is difficult to compare quotes or policies apples to apples. We really shouldn’t use that term – insurance policies are rarely “apples to apples”. The premium difference often comes from how the data, discounts, or coverages were entered, not from a “better rate.”

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A Home Insurance Example

Let’s say you’re shopping for home insurance in Myrtle Beach.

You get two quotes from two different agencies — both with the same carrier. One quote is $1,800 and the other is $1,550.

It’s tempting to think one agent “got a better rate.” But what’s more likely is:

• The $1,550 quote has a higher deductible or missing endorsement

• The dwelling coverage amount is lower

• One quote omitted optional coverages like wind/hail coverage, personal injury, service line, or water backup

• Or, one agent applied more discounts (like auto/home bundle, alarm credit, or roof type)

The rate per $1,000 of coverage is identical — but the final premium changes because of the way those coverages and discounts were applied.

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Why This Matters for South Carolina Homeowners and Businesses

Whether you’re insuring a home in Myrtle Beach or a business in Conway, your rate is determined by the insurance company’s filed guidelines — but your premium reflects all the moving parts.

Working with an independent insurance agency like Davis Insurance Associates gives you the advantage of comparing multiple carriers, coverage options, and discount opportunities — so you can find the best overall value, not just the lowest price tag.

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Quick Recap: Rate ≠ Premium

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How to Lower Your Premium (Even If the Rate Is Set)

While the rate is fixed by the carrier, you can still reduce your premium by:

• Improving your claims history or safety record

• Reviewing coverage options annually

• Bundling home and auto policies

• Installing protective devices (alarm systems, water sensors, etc.)

• Reviewing your dwelling coverage to ensure it matches replacement cost — not market value

These adjustments help maximize available discounts and ensure you’re paying for the right coverage, not excess exposure.

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Final Thoughts

     The rate is the math.
     The premium is the price.

Understanding the difference helps you see why one quote might be higher or lower — and where to focus if you want to save money without cutting coverage.

If you’re comparing home, auto, or business insurance in South Carolina, let our team at Davis Insurance Associates review your quotes to make sure you’re comparing the same coverages and getting every discount you deserve.

👉 Request a Quote or call (843) 213-0000 today.