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 it, where you live, and what coverage you choose. You can lower your premium by changing some of these factors — raising your deductible, bundling policies, improving your driving record, or switching insurers. Not every method works for every person, and some take time to show results. This guide walks through the concrete steps you can take right now and what to expect from each one.

Key Takeaways

• Raising your deductible from $500 to $1,000 typically cuts your collision and comprehensive premiums by 15 to 30 percent, but you pay more out of pocket if you have an accident.
• Bundling your car insurance with home, renters, or other policies usually saves 15 to 25 percent on your car premium, and most insurers offer this discount automatically once you add a second policy.
• A clean driving record lowers your rate, but most insurers keep accidents and violations on your record for three to five years before the discount returns.
• Switching insurers every two to three years often costs less than staying with one company, because new-customer discounts are usually larger than loyalty discounts.
• Low-mileage discounts, good-student discounts, and safety feature discounts exist but vary widely by insurer, so you need to ask each one what they offer.

Raise your deductible to cut collision and comprehensive costs

Your deductible is the amount you pay toward a claim before your insurance pays the rest. Collision coverage (damage from accidents) and comprehensive coverage (theft, weather, vandalism) both have deductibles. Liability coverage does not.

Raising your deductible lowers your premium because the insurance company takes on less financial risk. A deductible of $1,000 instead of $500 typically reduces your collision and comprehensive premiums by 15 to 30 percent, though the exact savings depend on your age, location, and driving record. A $2,500 deductible saves more, but you then pay $2,500 out of your own pocket if you have a covered accident.

This trade-off makes sense if you have savings set aside for emergencies. If you cannot afford to pay your deductible after an accident, a higher deductible creates a problem rather than a solution. You can also set different deductibles for collision and comprehensive — for example, $500 for comprehensive (which covers less common events like theft) and $1,000 for collision.

Bundle your car insurance with other policies

Most insurers offer a discount when you buy more than one policy from them. Bundling car insurance with homeowners insurance, renters insurance, or umbrella coverage typically saves 15 to 25 percent on your car premium. Some insurers also bundle auto with life insurance or business policies.

The discount usually applies automatically once you add a second policy to your account, though you should confirm this with your insurer. The total savings depend on how many policies you bundle and which insurer you use — some companies offer larger multi-policy discounts than others. If you are currently insuring your home and car with different companies, getting a quote for both policies from one insurer can show you the bundled price.

Bundling does not always mean you get the lowest rate on each individual policy. Sometimes one insurer is cheapest for car insurance but expensive for home insurance, or vice versa. Compare the total cost of bundling against the cost of splitting your policies between two insurers before you decide.

Switch insurers every two to three years

Insurance companies offer larger discounts to new customers than to people who have been with them for years. Switching insurers every two to three years often costs less than staying loyal to one company, even though you lose any loyalty discount you had built up.

To find a lower rate, get quotes from at least three different insurers. Most insurers let you get a quote online in 10 to 15 minutes by entering your driver's license number, vehicle identification number (VIN), and current coverage information. You do not have to buy anything to get a quote. Once you find a lower rate, contact that insurer to start a new policy. Your new policy can start on the same day your old one ends, so there is no gap in coverage.

When you switch, make sure you are comparing the same coverage limits and deductibles across all quotes. A quote that looks cheaper might have lower liability limits or a higher deductible, which means less protection in an accident. Ask each insurer what discounts they offer — some may have discounts you did not know about that could lower your rate further.

Improve your driving record

Accidents and traffic violations raise your insurance rate because they signal higher risk to the insurer. A clean driving record — no accidents, tickets, or claims — qualifies you for a good-driver discount at most insurers, typically 10 to 15 percent off your premium.

Most insurers keep accidents and violations on your record for three to five years. After that time passes, the incident stops affecting your rate, and you may see your premium drop. Some insurers offer accident forgiveness programs that do not raise your rate after your first accident, though you usually have to pay a higher premium upfront to get this protection.

Defensive driving courses can also lower your rate at some insurers. These courses teach techniques to avoid accidents and are often available online. The discount varies by insurer — some offer 5 to 10 percent off — and the course usually costs $20 to $50. Check with your insurer before you take a course to confirm they offer a discount for it.

Look for discounts specific to your situation

Beyond the major discounts, insurers offer smaller ones based on how you use your car and what safety features it has. These discounts vary widely by company, so you need to ask each insurer what they offer.

Low-mileage discounts explore if you drive fewer than a certain number of miles per year — often 7,500 to 10,000 miles. Some insurers use a device that plugs into your car to track your actual mileage, while others ask you to estimate. The discount is usually 5 to 15 percent.

Good-student discounts explore to drivers under 25 who maintain a certain grade point average, usually 3.0 or higher. The discount is typically 5 to 10 percent and requires proof of grades each term.

Safety feature discounts explore if your car has anti-theft devices, anti-lock brakes, airbags, or automatic emergency braking. Newer cars often may have access to for these discounts automatically. The savings are usually 5 to 10 percent per feature.

Paid-in-full discounts explore if you pay your entire premium upfront instead of in monthly installments. This discount is typically 5 to 10 percent and is offered by many insurers.

Adjust your coverage limits if appropriate

Your coverage limits are the maximum amount your insurance will pay in a claim. Liability coverage has limits for bodily injury per person and per accident, plus property damage. Collision and comprehensive have limits equal to your car's actual cash value.

Lowering your liability limits reduces your premium, but it also means less protection if you cause an accident that injures someone or damages their property. If you are sued for more than your limit, you may have to pay the difference out of your own pocket. Most states set minimum liability limits, and lenders require you to carry collision and comprehensive if you are financing or leasing a car.

Dropping collision or comprehensive coverage entirely is an option if your car is old and worth very little. If your car is worth less than 10 times your deductible, the savings from dropping coverage may outweigh the risk. For example, if your car is worth $3,000 and your deductible is $500, you might drop collision coverage. But if you still owe money on the car, your lender will not allow this.

Frequently Asked Questions

How much can I save by raising my deductible?

Raising your deductible from $500 to $1,000 typically saves 15 to 30 percent on collision and comprehensive premiums, though the exact amount depends on your age, location, and driving record. A $2,500 deductible saves more. Get a quote from your insurer with different deductible amounts to see the specific savings for your situation.

Does bundling really save money?

Bundling typically saves 15 to 25 percent on your car premium, but not always. Compare the total cost of bundling one policy with one insurer against splitting your policies between two insurers. Sometimes one company is cheapest for car insurance but more expensive for home insurance, so splitting saves more overall.

Will switching insurers hurt my credit score?

Switching insurers does not hurt your credit score. Insurance companies do a soft inquiry that does not appear on your credit report. You can get quotes from multiple insurers without any impact on your credit. Your credit score only matters if you are financing or leasing a car, which is a separate transaction.

How long does an accident stay on my insurance record?

Most insurers keep accidents on your record for three to five years. After that time, the accident stops affecting your rate. Some insurers offer accident forgiveness programs that do not raise your rate after your first accident, though you usually pay a higher upfront premium for this protection.

Can I drop collision coverage if my car is old?

You can drop collision coverage if your car is paid off and you own it outright. If you are financing or leasing the car, your lender requires you to carry collision and comprehensive coverage. If your car is worth very little, dropping collision may save money, but you then pay for any accident damage out of your own pocket.