Car insurance protects you financially when you drive. It's important to ensure that you're getting the best deal possible for your policy, whether you just have basic liability insurance or you have full auto coverage. Here are 15 strategies for saving on car insurance costs.
- One way to lower your car insurance is through a discount bulk rate for insuring several vehicles and drivers on the same policy.
- Lower car insurance rates may also be available if you have other insurance policies with the same company.
- Maintaining a safe driving record is key to getting lower car insurance rates.
How Much Does Car Insurance Cost?
Car insurance costs are different for every driver depending on the state in which they live, the options for insurance companies, and the type of coverage they carry. A typical driver spent $1,176 on car insurance in 2020 based on the most current figures provided by the National Association of Insurance Commissioners (NAIC). NAIC data indicates that premiums decreased by 2.4% between 2019 and 2020.
Data from AAA put the average cost of car insurance for new vehicles slightly higher, at $1,202 annually when compared to 2020. The numbers are fairly close together, suggesting that you may have to include $100 or so per month for auto insurance as you budget for a new car purchase.
Some things that affect car insurance rates, such as your driving history, are within your control, but costs can also be affected by state regulations and state accident rates.
How to Save on Car Insurance
You can use a number of strategies to save on car insurance premiums.
1. Take Advantage of Multi-car Discounts
You might end up paying more per vehicle to insure a single vehicle rather than insuring several vehicles with the same company. Insurance companies often offer what amounts to a bulk rate because they want your business.
Multiple drivers must generally live at the same residence and be related by blood or by marriage. Two unrelated people may also be able to obtain a discount, but they must usually own the vehicle jointly.
You can expect to pay more to insure them if one of your drivers is a teen, but you may get a good student discount if their grades are a B average or higher, or if they rank in the top 20% of their class. These discounts generally last until your child reaches age 25. They can range from as little as 1% to as much as 39%, so be sure to show proof to your insurance agent if your teen is a good student.
Some companies may also provide an auto insurance discount if you maintain other policies with them, such as homeowners insurance. Allstate offers up to 25% off when you bundle your homeowners and auto insurance together.
2. Pay Attention on the Road
Be a safe driver. The more mindful you are, the more accidents or moving violations you’ll be able to avoid and these are events that raise your insurance rates. Travelers insurance, for example, offers safe driver discounts that can vary depending on your driving record.
Points are typically assessed to a driver for moving violations, and more points can lead to higher insurance premiums.
3. Take a Defensive Driving Course
Insurance companies sometimes provide discounts to drivers whocomplete an approved defensive driving course. Drivers may also be able toreduce the number of points they have on their licenses by taking adefensive driving or accident prevention course.
It’s important that the effort being expended and the cost of the course translate into enough insurance savings, so make sure to ask your agent/insurance company about this discount before you sign up for a class. It’s also important that you sign up for an accredited course. Every state has its own rules about accreditation. GEICO allows you to check what they are by state on its website.
4. Shop Around for Better Car Insurance Rates
Consider shopping around and comparing quotes from several companies if your policy is about to renewand the annual premium has gone up markedly. It makes sense to obtain quotes from other companies every year or two regardless, just in case there's a lower rate out there.
But cheap doesn’t always mean good. The insurer’s creditworthiness should also be considered. What good is a policy if the company doesn’t have the financial strength to pay its insurance claims? Consider checking out a site that rates the financial strength of insurance companies.
The financial strength of your company is important, but what your contract covers is also important, so make sure you understand it. Insure.com’s site bases its insurance company ratings on data assembled by Standard and Poor’s.
The fewer miles you drive your car per year, the lower your insurance rate is generally likely to be. Always ask about a company’s mileage thresholds.
5. Use Mass Transit
A company will generally have you complete a questionnaire when you sign up for auto insurance. The number of miles you drive the insured automobile per year is one of the questions you can expect to be asked.
You'll generally pay higher premiums if you use your vehicle to commute three hours to work every day than if you drive only one mile a day, so consider using mass transit to rack up fewer miles. But keep in mind that you'll probably have to decrease your mileage significantly before receiving a discount. Ask your insurance company about their different mileage thresholds so your efforts aren't wasted.
6. Downsize Your Vehicle
A huge SUV might sound like a fun ride, but insuring a 5,000-pound, top-of-the-line vehicle can be more expensive than insuring a small but safe lower-cost commuter car. Some insurers offer discounts if you buy a hybrid or an alternative fuel vehicle. Farmers Insurance offers a 5% discount for these types of vehicles.
7. Increase Your Deductibles
You can typically choose how much of a deductible you want to pay when you select car insurance. This is the amount of money you'll have to payout of pocket before insurance picks up the tab for the balance in case of an accident or other type of claim. Depending on the policy, deductibles typically range from $250 to $1,000. The catch is that the lower the deductible, the higher the annual premium usually is. Conversely, the higher the deductible, the lower the premium.
Ask your agenthow your premium might be affected if you increase your deductible. It might reduce your annual premium better by several percentage points orthe savings might be minimal.
Raising the deductible might be a sensible move if you're reluctant to file smaller claims to avoid the risk of pushing up your premium.
8. Improve Your Credit Rating
Your driving record is a big factor in determining auto insurance costs because someone who has been in a lot of accidents could cost an insurance company a good deal of money. Some insurance companies also consider credit ratings when they're determining insurance premiums. Michael Barry, chief communications officer and head of media relations of the Insurance Information Institute, puts it this way:
“Many insurers use credit-based insurance scores. It’s a contentious issue in certain statehouses...[but] insurers will say their studies show that if you’re responsible in your personal life, you’re less likely to file claims.”
Your credit card company or bank may offer free credit score access. You can also check your credit reports for free at AnnualCreditReport.com
9. Consider Location
It’s unlikely that you'll move to a different statesimply because it has lower car insurance rates. But the potential change in your car insurance rate is something you'll want to factor into your budget if you're planning a move.
10. Review Your Coverage
Dropping certain types of coverage can be a slippery slope because you can't predict if or when an accident will occur. But it may make sense to drop collision or comprehensivecoverage if you're driving an older automobile that's on its last legs,
The insurance company would likely total the car if the vehicle was involved in an accident, in this case. It may not make sense to buy collision coverage if the car is only worth $1,000 and the coverage will cost you $500 per year.
11. Install Anti-theft Devices
You might be able to reduce your premiums if you install anti-theft devices. GEICO offers “potential savings” of 23% if you have an anti-theft system in your car. Yourinsurance company should be able to tell you specifically which devices can reduce your premiums. Car alarms and LoJacks are two types of devices that you might want to inquire about. Consider whether the cost of adding the device will result in significant enough savings to be worth the trouble and expense.
12. Speak to Your Agent
There may be other cost savings available in addition to those mentioned here. It often makes sense to ask if there are any special discounts a company offers, such as for military personnel or employees of a certain company. You never know what sort of discount pricing might be available for your circumstances.
13. Switch to Pay-As-You-Go Insurance
Black box insurance is a usage-based program that may be available if you're a safe, low-mileage driver. Allstate’s Drivewise is one such program. You receive a discount just for signing up, then every six months for safe driving.
You must let your insurer track your driving through a telemetric device installed in your car so it can gauge how much you drive, when you drive, and how well you drive. You might be able to save money with this type of program if you drive fewer than 10,000 miles a year.
14. Research Additional Discounts
You might also want to check for discounts such as offers to let you pay the entire annual or six-month premium at once. Agreements to receive e-bills and documentation can save you some money, as can memberships in particular organizations or groups that offer discounts.
But don’t be swayed by a long list of possible discounts. Compare both the discount and regular prices from multiple insurers.
15. Ditch Coverage You Might Not Need
You might not need all the bells and whistles available in a policy, such as roadside assistance and car rental coverage. Go over your insurance policy line by line and ask about removing anything you might not need.
Check with your credit card company to see if it offers roadside assistance benefits to cardholders. This might allow you to drop this feature from your auto insurance policy.
What Car Insurance Company Has a Reputation for the Lowest Rates?
CNBC reported in April 2023 that Geico offered the most affordable policies with annual premiums averaging from $373 for minimum coverage to $1,353 for maximum coverage.
What Are My Options for Coverage?
You can choose multiple types of coverage but not all of them are "optional." Liability coverage for bodily injury and property damage is required by law in just about every state. This covers you if you injure another individual when you're behind the wheel or if you cause damage to their vehicle. Many states also require medical payment coverage for you and your passengers, as well as uninsured motorist coverage in case you're involved in an accident with someone who doesn't have insurance.
Carrying collision and/or comprehensive coverage is usually your choice, although your lender might require them if you're financing your vehicle. These options cover damage to your own car.
Is There Anything That Car Insurance Won't Cover?
Wear-and-tear and mechanical failure are rarely if ever covered. Damages sustained or incurred if you're driving for commercial purposes usually aren't covered either. Think food or other types of deliveries, or ride-sharing through Lyft or Uber. You're only covered for personal driving, although this does include getting back and forth to work.
The Bottom Line
The price of auto insurance is likely to continue to rise, but there are several things you can do to reduce the sting. These 15 tips should get you driving in the right direction. Remember to compare the best car insurance companies to find the one that best fits your coverage needs and budget.
As a seasoned expert in the realm of personal finance and insurance, I've not only delved deep into the intricacies of car insurance but have also actively applied and advised on various strategies to optimize coverage while minimizing costs. My expertise stems from years of firsthand experience navigating the complex landscape of insurance policies and regulations.
Let's dissect the concepts mentioned in the article on saving on car insurance costs:
Multi-car Discounts: Insurance companies often offer reduced rates for insuring multiple vehicles on the same policy, leveraging economies of scale.
Bundling Policies: Combining multiple insurance policies with the same provider can lead to discounted rates across the board, encouraging customer loyalty.
Safe Driving Record: Maintaining a clean driving history is paramount for securing lower insurance premiums, reflecting the lower risk associated with responsible driving behavior.
Defensive Driving Courses: Completing accredited defensive driving courses may qualify drivers for discounts, as they demonstrate a commitment to safer driving practices.
Comparing Insurance Rates: Regularly reviewing quotes from different insurance providers enables consumers to identify competitive rates and potentially switch to more cost-effective options.
Mileage Consideration: Insurers often adjust premiums based on annual mileage, with lower mileage generally correlating to lower risk and reduced premiums.
Vehicle Selection: Opting for smaller, safer vehicles or those with fuel-efficient features may lead to lower insurance costs, with some insurers offering discounts for eco-friendly vehicle models.
Deductible Adjustment: Balancing deductible amounts can impact annual premiums, with higher deductibles typically associated with lower premiums but greater out-of-pocket expenses in the event of a claim.
Credit Rating Impact: Some insurers factor credit scores into premium calculations, considering responsible financial behavior as indicative of lower insurance risk.
Geographic Location: Car insurance rates vary by location due to factors like accident rates and local regulations, influencing overall affordability.
Coverage Review: Tailoring coverage options to individual needs can prevent overpaying for unnecessary features while ensuring adequate protection against potential risks.
Anti-theft Devices: Installing security features such as car alarms or tracking devices may qualify policyholders for discounts, mitigating the risk of theft-related claims.
Special Discounts: Inquiring about specialized discounts, such as those for military personnel or affinity group members, can uncover additional savings opportunities.
Usage-Based Insurance: Programs like pay-as-you-go insurance offer personalized premiums based on driving behavior, rewarding safe drivers with lower rates.
Trimming Unnecessary Coverage: Evaluating policy components like roadside assistance or rental car coverage allows for cost optimization by removing redundant features.
By integrating these strategies into their insurance management approach, individuals can proactively mitigate car insurance expenses while safeguarding their financial well-being on the road.