No one wants to overpay for necessities like gas, rent, and cell phone service. The same goes for car insurance. And just like you can look for deals on other purchases, you can look for ways to lower your car insurance costs.
With the average good driver in the US paying $1,556 a year for car insurance, reducing your insurance bill by just 5% to 10% can put more money in your pocket. In some cases, you can reduce the cost of your car insurance by 30% or more. Here are 10 tips to help lower your car insurance premiums.
Shop Around
Many of us shop for bargains on electronics, clothing and other everyday purchases. You can apply the same strategy to car insurance.
Whether you’re taking out insurance for the first time, renewing your cover or switching to another insurer, don’t overlook the savings you can achieve by comparing rates from several insurers.
Car insurance rates for the same coverage can vary widely between insurers, so unless you shop around you won’t know how much you could potentially save. The industry-backed Insurance Information Institute suggests getting quotes from at least three insurers to compare car insurance costs and coverage.
Remember to compare the same coverage and policy limits, so it’s an apples-to-apples price comparison
Related: Cheapest Car Insurance Companies
Check Your Deductibles
Rebekah Nelson, spokeswoman for USAA, recommends checking the deductibles associated with your current coverage to see if you can raise them.
“If you haven’t done it in a while, you may find that a higher deductible is more appropriate and will lower your rate,” Nelson says.
A car insurance deductible is an amount that is deducted from your insurance check when you file a comprehensive or collision insurance claim. You choose the deductible amount when you buy the policy and can adjust it later if you change your mind. A higher deductible means you pay lower premiums. This is because you take on more costs when filing a claim and are less likely to claim for minor damages because the cost of repair won’t exceed your deductible by much.
The Insurance Information Institute says that raising your deductible from $200 to $500 could reduce the cost of your collision and comprehensive coverage by 15% to 30%. Raising your deductible even higher, to $1,000, could result in savings of 40% or more.
The institute also points out that if you raise your deductible, you should put enough money aside in case you end up filing a claim. For example, let’s say your crash payout is $5,000 and your deductible is $1,000. Your insurance company will pay $4,000, so you are responsible for $1,000 in out-of-pocket expenses to repair the damage to the vehicle.
Insurance Package
You will often see TV commercials promoting the option to bundle car and home insurance. Most insurance companies offer discounts to policyholders who have both auto and home policies, and bundling can apply to other coverage, such as motorcycle and boat insurance.
In general, a combined discount (also known as a multi-policy discount) can result in savings of between 5% and 25%.
Not only can you get a discount on bundles, but buying more than two policies from one company “also simplifies your insurance because you have them with one carrier,” Nelson points out.
Research Car Insurance Discounts
Car insurance companies offer a variety of discounts in addition to bundled discounts. The most common discounts include:
- Discount for multiple cars. Insuring more than one vehicle with the same insurer can result in savings of 8% to 25%.
- Discount for vehicle safety. If your car is equipped with the latest safety features such as anti-lock brakes and airbags, you may qualify for a discount.
- New car discount. Do you drive a car less than three years old? If so, you can choose a discount of 10% to 15%.
- Good driver discount. If you go without an accident or traffic violation for a certain period of time, your auto insurer can reward you with a discount of 10% to 40%.
- Good student discount. Good grades can pay off. Some insurers extend discounts ranging from 8% to 25% to a full-time high school or college student who is between the ages of 16 and 25 and earns at least a B average.
Have Your Insurer Track Your Driving
A number of car insurers allow you to potentially lower your bill by signing up for usage-based car insurance. These programs use an app or device that connects to your car to monitor your driving behavior. Factors tracked can include how many miles you drive, speeding, and how often you hit the brakes.
If the data shows you are a good driver, you may qualify for a discount. For example, if a customer joins USAA’s SafePilot program, they can get a discount of up to 30%. Other examples of usage-based auto insurance include Snapshot from Progressive, State Farm’s Drive Safe & Save, and Allstate’s Drivewise.
Be aware that in some cases, usage-based insurance can increase your rates, according to TransUnion’s 2022 “Insurance Trends and Outlook” report. Usage-based car insurance is best for low-mileage drivers who don’t drive at night and have very safe driving habits.
Take a Defensive Driving Course
Successfully completing a defensive driving course that is approved by your insurer can lead to savings on your car insurance. For example, a driver in Texas who takes one online defensive driving course approved by Geico can receive a discount of up to 10% for three years. In New York, you can reduce your rate by 10% for three years by successfully completing an approved driving safety course.
Park in the Garage
Some insurance companies will reduce your car insurance if you park your car in your home garage and not in your driveway or street. Data shows that cars parked in garages are less likely to be stolen or damaged in an accident.
Drive a Safe Car with Low Repair Costs
When visiting car dealerships in person or online, consider the type of car you will be purchasing. Some cars are cheaper to insure than others.
In addition to your age, driving record and other variables, insurance companies take into account the type of vehicle you drive when pricing your insurance. They look at how likely a particular car is to be stolen, how much it usually costs to repair that type of car, how safe it is, and how many claims are made for similar models.
The Insurance Institute for Highway Safety has safety ratings for thousands of vehicle models and also shows the percentage above or below the average number of claims filed for specific vehicle classes. The National Insurance Crime Bureau lists the most stolen cars every year.
Related: Check out Forbes Advisor’s ranking of the most expensive and cheapest cars to insure.
Build Your Credit If Possible
Most states allow insurers to provide credit-based insurance scores to help you determine your auto insurance rates. This score predicts how likely you are to file a car insurance claim. The lower your credit score, the higher the chance of making an expensive application. If you can raise your traditional credit score, it can also raise your credit-based insurance score, paving the way for better auto insurance rates.
A Forbes Advisor rate analysis found that drivers with bad credit pay an average of 76% more than those with good credit.
If Possible, Pay the Premium in Full
Instead of spreading your premium payments by paying monthly, consider paying the premium in one lump sum. Many auto insurers will give you a small discount for this. Major insurance companies offering this discount include Progressive, Allstate, American Family and Farmers.
