Ways to Lower Your Car Insurance Costs

How to reduce what you pay for car insurance

Car insurance costs depend on what you drive, how you drive, who you are, and what coverage you choose. You can lower your premium by changing some of these things — bundling policies, raising your deductible, dropping coverage you don't need, or taking a defensive driving course. Not every option works for every person, but most drivers can find at least one or two that fit their situation.

The most direct way to save is to shop around. Insurance companies price the same driver differently, sometimes by hundreds of dollars a year. Getting quotes from at least three companies takes an hour and often saves more than any single discount.

Key Takeaways

• Bundling your car and home insurance with one company typically saves 15 to 25 percent on your car premium.
• Raising your deductible from $500 to $1,000 usually lowers your collision and comprehensive coverage costs, but you pay more out of pocket if you have a claim.
• Completing a defensive driving course can reduce your premium by 5 to 15 percent and may lower points on your license after a ticket.
• Comparing quotes from at least three different insurers often reveals price differences of $300 or more per year for identical coverage.
• Dropping collision or comprehensive coverage on an older car may save money if the car's value is low enough that repair costs would not justify the premium.

Bundle your car insurance with home or renters coverage

Most insurance companies offer a discount when you buy more than one policy from them. This is called bundling. If you have homeowners or renters insurance, moving your car policy to the same company usually saves money on both policies.

The discount amount varies by company and by state. Some companies discount your car premium by 10 percent; others offer 25 percent or more. Ask each company what their bundle discount is before you decide. Sometimes the bundle discount is larger than the difference in base rates, which means bundling saves you even if that company's regular prices are higher.

Raise your deductible to lower your monthly cost

Your deductible is the amount you pay toward a claim before insurance covers the rest. A higher deductible means lower monthly premiums. If you raise your deductible from $500 to $1,000, your collision and comprehensive coverage will cost less each month.

The trade-off is that you pay more if you have an accident or weather damage. Raise your deductible only if you have savings set aside to cover it. If you cannot afford to pay $1,000 out of pocket, a $500 deductible is the right choice for you, even if it costs more per month.

Take a defensive driving course

Many insurance companies reduce your premium if you complete a defensive driving course. These courses teach accident prevention and are usually offered online. The discount typically ranges from 5 to 15 percent and lasts for three years.

Some states also allow you to take a defensive driving course to remove points from your license after a traffic ticket. This can prevent your insurance rates from going up in the first place. Check with your insurance company about which courses they recognize — not all online courses may have access to for the discount.

Drop collision or comprehensive coverage on an older car

Collision coverage pays for damage to your car from an accident. Comprehensive coverage pays for damage from weather, theft, or vandalism. If your car is old and not worth much, the cost of these coverages may be more than you would get back in a claim.

A rough rule: if your car is worth less than 10 times your annual collision and comprehensive premium, dropping these coverages may save money. For example, if your collision and comprehensive coverage costs $150 a year combined, and your car is worth less than $1,500, you might consider dropping them. You still need liability coverage by law, but you can skip the optional coverages.

Shop around and compare quotes from multiple companies

Insurance companies use different formulas to price policies. One company might charge you $1,200 a year while another charges $900 for the same coverage. The only way to know is to get quotes.

Collect quotes from at least three companies. Use the same coverage limits and deductibles for each quote so you are comparing the same thing. Many companies offer online quote tools that take 10 to 15 minutes. Some will also give you a quote over the phone or through an agent. Write down the company name, coverage details, and price for each quote so you can compare them side by side.

Ask about discounts you may not know about

Beyond bundling and defensive driving, insurance companies offer discounts for things like paying your bill in full instead of monthly, having safety features in your car, being a good student, or driving less than average. Some companies discount if you let them monitor your driving through an app.

When you get a quote, ask the company to list every discount they offer. Then ask which ones you may have access to for. Some discounts are automatic, but others you have to request. A company might not mention a discount unless you ask, so it is worth spending a few minutes on this step.

Frequently Asked Questions

Will my insurance go down if I pay in full instead of monthly?

Many companies offer a small discount — usually 2 to 5 percent — if you pay your annual premium all at once instead of in monthly installments. This discount is not may provide at every company, so ask when you get your quote. The savings are modest, but if you have the cash available, it is an straightforward way to reduce your bill.

Does my driving record affect how much I pay?

Yes. Accidents and traffic tickets raise your premium because they signal higher risk to the insurance company. A ticket or accident typically stays on your record for three to five years, depending on your state. Staying ticket-free and accident-free is one of the most effective ways to keep your rates low over time.

Can I get a discount for driving less?

Some companies offer low-mileage discounts if you drive fewer than a certain number of miles per year — often 7,500 to 10,000. A few companies use apps or plug-in devices to track your actual mileage. If you work from home or use public transit most days, ask your insurance company whether they offer this discount.

What if I have a teenage driver on my policy?

Adding a teenager to your policy usually raises your premium significantly because young drivers have more accidents. Some companies offer discounts if the teenager completes a driver training course or maintains a good grade point average in school. Bundling the teen's coverage with your own policy is typically cheaper than giving them a separate policy.

Should I switch insurance companies every year to save money?

Switching can save money if another company offers better rates, but loyalty discounts and the hassle of switching are worth considering. Some companies discount long-term customers. Get quotes every two to three years to make sure you are still getting a fair price, but you do not need to switch every year unless you find a significantly better rate.