Car insurance is essential for financial protection while driving, but it's also crucial to make sure you get the best deal on your policy—whether it's basic liability coverage or comprehensive car insurance. Here are 15 tips to help you save money on your car insurance.
How much does car insurance cost?
The cost of car insurance depends on factors such as your location, available insurance providers, and the type of coverage you choose. According to the National Association of Insurance Commissioners (NAIC), the average driver spent about $1,176 on car insurance in 2020. NAIC data also shows that premiums fell 2.4% from 2019 to 2020.
Meanwhile, data from the American Automobile Association shows that the average annual cost of new car insurance in 2020 was slightly higher at $1,202.
These numbers are very similar, which means you should consider budgeting about $100 per month for car insurance when you buy a new car.
How to Lower Your Car Insurance Costs
There are several ways to lower your car insurance premiums:
1. Take Advantage of Multi-Car Discounts It is usually cheaper to insure multiple cars with the same company than it is to insure a single car.
Many insurance companies offer bulk rates to attract more business. Typically, all drivers must live in the same household and be related by blood or marriage to qualify. However, two unrelated people who own a car together may also qualify for a discount. Insuring a teen driver will usually increase your costs, but you may be able to get a discount if your teen has excellent grades (usually a B average or higher, or is in the top 20% of the class). These discounts usually apply until your child is 25 years old or older and range from 1% to 39%. Be sure to provide proof of excellent grades to your insurance company.
Some insurance companies may offer additional discounts if you bundle your car insurance with other insurance, such as homeownership insurance. For example, Allstate can give you up to a 25% discount if you bundle your car and homeownership insurance together.
2. Stay Alert While Driving
Drive safely and attentively. The more careful you are, the less likely you are to get into an accident or traffic violation that could cause your insurance premium to go up. For example, Travelers Insurance offers discounts to safe drivers, with the amount of the discount depending on your driving history.
3. Complete a defensive driving course
Some insurance companies offer discounts to drivers who successfully complete an approved defensive driving course. Additionally, taking such a course can help drivers reduce points on their license due to traffic violations.
Before you sign up, make sure the time and money spent on the course will result in enough insurance savings. It’s best to ask your agent or insurance company about this discount. Also, make sure the course is certified, as each state has its own certification requirements. For example, GEICO allows you to view certification standards by state on its website.
4. Compare car insurance rates
If your policy is coming up for renewal and your premiums are going up significantly, you may want to shop around and compare quotes from different insurance companies. It’s best to get quotes every one or two years to see if there are more affordable options.
However, keep in mind that the lowest price doesn’t always mean the best deal. It’s important to consider the financial stability of the insurance company—what good is a policy if the company can’t pay claims when it needs to? You can check the ratings of the insurer's financial strength on websites that rate these factors.
While the financial strength of the insurer is crucial, you should also pay attention to the coverage of your policy. Make sure you fully understand the terms. For example, Insure.com's insurer ratings are based on data from Standard & Poor's.
5. Use public transportation
When you sign up for auto insurance, you'll usually be asked to fill out a questionnaire that includes questions about how many miles you drive each year.
If you commute a long distance (such as three hours a day to work), your premiums may be higher than if you only drive one mile a day. To reduce your mileage and lower your rates, consider using public transportation. However, you'll need to drive significantly less to get a discount. Check with your insurer to find out their specific mileage thresholds to make sure your efforts will pay off.
6. Choose a smaller vehicle
While a large SUV may seem like an exciting option, insuring a heavy vehicle that weighs 5,000 pounds and is loaded with advanced features may be much more expensive than insuring a small, affordable commuter car. Some insurers offer discounts for hybrid or alternative fuel vehicles. For example, Farmers Insurance offers a 5% discount on these types of cars.
7. Increase your deductible
When choosing car insurance, you can usually choose a deductible, which is the amount you need to pay out of pocket before the insurance company covers the remaining costs in the event of an accident or claim. Deductibles usually range from $250 to $1,000. The key is that lower deductibles usually mean higher premiums, while higher deductibles usually result in lower premiums.
To understand how this will affect your costs, ask your agent what effect raising your deductible will have on your premiums. In some cases, this can result in significant savings, while in other cases, the reduction may be minimal.
If you're reluctant to file small claims, raising your deductible may be a smart choice because it can help you avoid an increase in your premiums.
8. Improve your credit score
While your driving history plays a big role in determining your car insurance rates (since frequent accidents can lead to increased costs for insurance companies), some companies also take your credit score into account. Michael Barry, chief communications officer for the Insurance Information Institute, explains:
“Many insurance companies use credit-based insurance scores. This practice is controversial in some states, but insurance companies argue that their research shows that people who are responsible with their finances are less likely to file claims.”
9. Consider Your Location
While it’s unlikely that you’ll move simply to take advantage of lower car insurance rates, it’s something to keep in mind when budgeting for your move. A change in location can significantly affect your insurance premiums.
10. Review Your Coverage
Reducing certain types of insurance can be risky because you can’t predict when or if an accident will occur. However, if you’re driving an older car that’s close to total loss, it may be a smart move to drop collision or comprehensive coverage.
In this case, if an accident occurs, the insurance company will most likely declare the car a total loss. For example, it may not be worth it to purchase collision coverage on a car that’s only worth $1,000 if the premium is $500 per year.
11. Install an Anti-Theft Device
Installing an anti-theft device on your vehicle may help lower your premiums. For example, GEICO offers potential savings of up to 23% on cars equipped with an anti-theft system.
Ask your insurance provider what specific equipment could lower your premiums. Car alarms and LoJack are common choices. Before you buy, weigh the cost of the equipment against the potential savings to make sure it's worth the investment.
12. Talk to your agent
In addition to the offers mentioned here, there may be other discount opportunities. It's best to ask your agent if there are any special discounts, such as those for military personnel or employees of certain companies. Depending on your situation, you may be surprised at the discounts available.
13. Consider buying pay-as-you-go insurance
Pay-per-ride or black box insurance is a type of usage-based insurance that may help you if you're a safe driver with low mileage. Programs like Allstate's Drivewise offer discounts just for signing up, and additional offers every six months for safe driving.
To participate, you'll need to allow the insurance company to track your driving habits using a telemetry device in your car. The device monitors how long you drive, how often you drive, and how safely you drive. If you drive less than 10,000 miles per year, this type of program can help you save money.
14. Look for additional discounts
Be sure to explore other potential discounts, such as offers for paying your premium in full upfront, opting for e-billing and e-filing, or becoming a member of certain organizations that offer insurance discounts.
However, don't get too hung up on a long list of possible discounts. It's important to compare discounts and standard rates from different insurance companies to find the best deal.
15. Eliminate unnecessary coverage
You may not need all of the extras included in your policy, such as roadside assistance or car rental insurance. Take a close look at your policy and ask your provider to remove any coverage you don't actually need.
