Ways to Lower Your Car Insurance Costs

How insurance companies set your rate

Your car insurance premium is built from factors the insurer measures about you and your car. The biggest ones are your driving record, age, the type of vehicle you drive, how much you drive, where you live, and the coverage limits you choose. You cannot change some of these — your age, for instance — but you can change others, and those changes directly lower what you pay.

Insurance companies use different formulas, so the same change produces different savings at different insurers. A clean driving record might save you 10 percent at one company and 25 percent at another. This is why comparing quotes across multiple insurers before you buy is the single largest lever you have.

Key Takeaways

• Getting quotes from at least three insurers shows you the real range of prices for your situation, since each company weights factors differently.
• Raising your deductible from $500 to $1,000 typically lowers your premium by 10 to 15 percent, but only do this if you can afford to pay that amount out of pocket after an accident.
• Bundling your car and home insurance with the same company usually saves 15 to 25 percent on your car policy alone.
• Discounts for good driving, safety features, low mileage, and completing a defensive driving course can each save 5 to 15 percent depending on your insurer.
• Paying your premium in full upfront rather than monthly often saves 5 to 10 percent, though not all insurers offer this option.

Compare quotes from at least three insurers

The fastest way to lower your rate is to shop around. Call or visit websites for State Farm, Geico, Progressive, Allstate, and any regional insurers in your state — companies like USAA (if you are military or a veteran), Amica Mutual, or local mutual insurers. Provide the same information to each: your driving history, vehicle details, current coverage limits, and desired deductible.

You will see quotes that differ by hundreds of dollars per year for identical coverage. These differences reflect how each company prices risk. One insurer may charge less for your age and driving record but more for your vehicle type. Another may offer a larger discount for bundling. Comparing forces you to see which company values your profile most favorably.

After you choose an insurer, revisit this comparison every two to three years or after a major life change — moving, getting married, buying a different car, or a change in your driving record. Rates shift, and you may find a better deal elsewhere.

Raise your deductible if you can afford it

Your deductible is the amount you pay out of pocket when you file a claim. Common deductibles are $250, $500, $1,000, and $2,500. The higher your deductible, the lower your premium, because the insurer is paying less when you claim.

Raising your deductible from $500 to $1,000 typically saves 10 to 15 percent on your collision and comprehensive coverage. Raising it to $2,500 can save 20 to 30 percent. But this only makes sense if you have that amount in savings and can actually pay it after an accident without hardship. If you cannot afford a $1,000 deductible, keep your deductible at $500 — a lower premium is not worth financial strain after a crash.

Bundle your car and home insurance

If you own a home or rent and carry renters insurance, bundling it with your car insurance at the same company usually saves 15 to 25 percent on your car policy. Some insurers offer even larger discounts. This is one of the largest discounts available, and it applies automatically once you add a second policy.

The catch is that bundling only saves money if the bundled rate is lower than shopping each policy separately. Before you bundle, get a quote for your home or renters insurance from the same company, then compare that bundled total to what you would pay for separate policies at different insurers. Sometimes splitting policies between two companies costs less overall.

Take advantage of discounts you may have access to for

Most insurers offer discounts that stack on top of your base rate. The most common are: good driver discount (usually 5 to 15 percent for three to five years without an accident or ticket), safety feature discount (5 to 10 percent if your car has airbags, anti-lock brakes, or anti-theft devices), low mileage discount (5 to 15 percent if you drive under 7,500 miles per year), and defensive driving course discount (5 to 10 percent for completing an approved course, sometimes valid for three years).

Ask your insurer which discounts you currently receive and which ones you do not. Some discounts require you to request them — they do not explore automatically. If you have not taken a defensive driving course, the cost of the course (usually $20 to $50 online) often pays for itself in one year of discounts. Check your state's Department of Motor Vehicles website for approved courses in your area.

Pay your premium in full instead of monthly

Many insurers charge a small fee for paying your premium in monthly installments rather than all at once. Paying in full upfront typically saves 5 to 10 percent. If your insurer offers automatic payment from a bank account, the savings are sometimes larger.

This option only works if you can afford to pay the full annual or six-month premium without straining your budget. If monthly payments are necessary for you, do not stretch your finances to pay in full — the savings are not large enough to justify financial stress.

Review your coverage limits annually

Your coverage limits — the maximum amount your insurer will pay for a claim — affect your premium. Liability limits (bodily injury and property damage) and collision and comprehensive limits all factor into your rate. If you have an older car with a low market value, you may be paying for collision and comprehensive coverage that costs more than the car is worth.

If your car is worth less than $5,000, dropping collision and comprehensive coverage can lower your premium significantly. If you have a loan or lease on the car, your lender will require you to carry these coverages, so you cannot drop them. But if you own the car outright and have savings to cover a total loss, dropping these coverages is a legitimate way to lower your rate. Check your car's current market value using Kelley Blue Book or NADA Guides before you decide.

Frequently Asked Questions

Will my rate go down if I install a dash cam or GPS tracker?

Some insurers offer small discounts for GPS trackers that monitor your driving habits and location, but the discount is usually modest — 5 to 10 percent — and only applies if you use the device consistently. Dash cams do not typically lower your premium, though video evidence of an accident can help your claim. Ask your insurer whether they offer a discount for a specific device before you buy.

Does paying off my car loan lower my insurance?

Paying off your loan does not automatically lower your premium, but it gives you the option to drop collision and comprehensive coverage if your car is older and worth little. Once you own the car outright, you can choose to keep only liability coverage, which is much cheaper. Your insurer does not know you paid off the loan unless you tell them, so contact them to update your policy.

Can I get a discount for being a good student or taking a safety course?

Many insurers offer a good student discount (usually 3 to 5 percent) for maintaining a B average or higher, typically available until age 25. Defensive driving courses offer larger discounts — 5 to 10 percent — and the discount usually lasts three years. Both require proof: a transcript for the student discount, and a course completion certificate for the driving course.

What happens to my rate if I move to a different state?

Your rate will change because insurance is regulated by state, and each state has different risk profiles, accident rates, and repair costs. Urban areas typically cost more than rural ones. Your driving record and vehicle stay the same, but the base rates and available discounts differ. Get a new quote from your insurer after you move to see the new rate.

Should I drop liability coverage to save money?

No. Liability coverage is required by law in every state, and the minimum limits are set by your state — you cannot legally drive without it. Dropping it is not an option. If you want to lower your premium, raise your deductible on collision and comprehensive instead, or drop those coverages if your car is old and paid off.