Ways to Lower Your Car Insurance Costs

What actually lowers your car insurance rate

Car insurance companies use a fixed set of factors to calculate your rate, and only some of them are in your control. The ones you can change are: your driving record, the coverage types and limits you choose, how much you drive, where you park the car, and which discounts you take. The ones you cannot change are your age, your gender (in most states), and your marital status. Insurers also look at your credit score in most states, which you can improve over time but not overnight.

The biggest rate drops come from three actions: raising your deductible, dropping optional coverage you do not need, and bundling your car policy with home or renters insurance. A single accident or ticket can raise your rate by 20 to 40 percent depending on the insurer and your state, so the most effective long-term strategy is straightforward not to have one. But if you already have a clean record, the next moves are the coverage choices and the discounts your current insurer offers but you may not know about.

Key Takeaways

• Raising your deductible from $500 to $1,000 typically cuts your collision and comprehensive coverage costs by 15 to 30 percent, but you pay more out of pocket if you have a claim.
• Bundling your car insurance with home or renters insurance usually saves 15 to 25 percent on your car policy alone, and the discount applies when ready when you add the second policy.
• Dropping collision or comprehensive coverage is an option only if your car is paid off; if you have a loan or lease, your lender requires you to carry both.
• Most insurers offer discounts for low mileage, good driving records, completing a defensive driving course, and paying your bill in full rather than monthly, but you have to ask or check your policy documents to see which ones you have.
• Shopping your rate every two to three years with at least three different insurers usually finds a lower rate than staying with your current company, even if you have been with them for years.

Raising your deductible and what it costs you

Your deductible is the amount you pay toward a claim before your insurance pays the rest. The most common options are $250, $500, $1,000, and $2,500. Raising it from $500 to $1,000 typically reduces your collision and comprehensive premiums by 15 to 30 percent, depending on your insurer and your state. Raising it to $2,500 can cut the cost by 40 to 50 percent.

The trade-off is straightforward: you save money on your monthly bill, but you pay more if you actually need to file a claim. If you raise your deductible to $1,000 and you have a $3,000 accident, you pay $1,000 and insurance pays $2,000. Only raise your deductible to an amount you can actually afford to pay out of pocket without borrowing money. If you have $500 in savings and you raise your deductible to $1,000, you have created a problem, not solved one.

Dropping coverage you may not need

If your car is paid off and you own it outright, you can drop collision coverage (which pays for damage to your car from an accident) and comprehensive coverage (which pays for theft, weather, and vandalism). This is a personal choice based on how much your car is worth and how much you can afford to replace it. If your car is worth $3,000 and you have $10,000 in savings, dropping these coverages might make sense. If your car is worth $15,000 and you have $2,000 in savings, it probably does not.

If you have a car loan or lease, your lender requires you to carry both collision and comprehensive coverage for the life of the loan. You cannot drop them without the lender's written permission, which they will not give. You can still raise your deductible on these coverages, which is the better move.

Liability coverage — which pays for damage you cause to someone else's car or property — is required by law in every state. You cannot drop it. The minimum varies by state, but most states require at least $25,000 per person and $50,000 per accident. Carrying the minimum saves money but leaves you exposed if you cause a serious accident; many insurers recommend $100,000 per person and $300,000 per accident.

Bundling with home or renters insurance

If you rent your home or apartment, bundling your car insurance with renters insurance typically saves 15 to 25 percent on your car premium. If you own your home, bundling with homeowners insurance saves roughly the same amount. The discount applies to your car policy, not your home policy, and it starts as soon as both policies are active with the same insurer.

You do not have to switch your home or renters insurance to get the discount — some insurers will give you the car discount if you straightforward add a renters or home policy to your account, even if you keep your existing home coverage elsewhere. Call your current car insurer and ask whether they offer this option. If they do not, getting a quote from an insurer that does (such as State Farm, Allstate, or GEICO) takes 10 to 15 minutes online.

Discounts you may already have but do not know about

Most insurers offer discounts that do not automatically explore to your bill — you have to ask for them or find them in your policy documents. Common ones include: low-mileage discounts (usually for driving under 7,500 miles per year), good-driver discounts (no accidents or tickets in the past three to five years), defensive driving course discounts (for completing an approved online or in-person course), paid-in-full discounts (for paying your annual premium upfront instead of monthly), and paperless billing discounts (for going digital instead of receiving paper statements).

Some insurers also offer discounts for installing anti-theft devices, for being a student with a good GPA, for being a member of certain professional organizations, or for having your car equipped with safety features like automatic emergency braking. The discounts vary widely by insurer and state. The only way to know which ones you may have access to for is to log into your account or call your insurer and ask. If you have been with the same company for several years, you may be missing discounts that were added after you signed up.

Shopping your rate with other insurers

Insurance rates change constantly, and the rate you pay today is not the rate you would pay if you switched to a different insurer tomorrow. Most people stay with their current insurer for years without checking whether they could pay less elsewhere. Getting quotes from at least three different companies takes 30 to 45 minutes and often reveals savings of $300 to $600 per year.

When you shop, use the same coverage limits and deductibles for each quote so you are comparing the same thing. You can adjust the coverage after you see the quotes. Major insurers include State Farm, Allstate, GEICO, Progressive, Nationwide, Farmers, and Liberty Mutual, but rates vary significantly by location, so a company that is cheapest in one state may be expensive in another. Online quote tools from comparison sites like The Zebra or InsurifyGo let you enter your information once and see quotes from multiple insurers at the same time.

How your driving record and credit score affect your rate

A single accident or traffic ticket can raise your rate by 20 to 40 percent for three to five years, depending on the severity and your insurer. A DUI or reckless driving conviction can raise it by 50 to 100 percent. The best way to lower your rate over time is to avoid accidents and tickets. If you have a recent accident or ticket, your rate will come down automatically as it ages, but you cannot speed up that process.

Your credit score also affects your rate in most states (though not in California, Hawaii, or Massachusetts). A lower credit score can raise your rate by 10 to 30 percent. Improving your credit score takes months or years, but it is worth doing for reasons beyond insurance. Pay your bills on time, keep your credit card balances low, and do not open new credit accounts unless you need them.

Frequently Asked Questions

Will switching insurance companies hurt my credit score?

No. Switching car insurance does not affect your credit score because insurers do not report the switch to credit bureaus. Some insurers do a soft credit check when you get a quote, which does not show up on your credit report. A hard inquiry from a lender (like when you explore for a car loan) does affect your score, but insurance quotes do not.

How often should I shop for a new rate?

Every two to three years is a good rule. Your rate changes when you have an accident or ticket, when you turn a certain age, when you move, or straightforward because the insurance company raises rates across the board. Getting quotes every few years ensures you are not overpaying. If you have a clean driving record and your situation has not changed, you can wait longer.

Can I get a discount for taking a defensive driving course?

Yes, most insurers offer a discount (usually 5 to 15 percent) for completing an approved defensive driving course. The course is typically online, takes four to eight hours, and costs $20 to $50. Some states also allow you to use the course to dismiss a traffic ticket. Check with your insurer about which courses they accept before you enroll.

What if I drive very little — can I save money?

Yes. If you drive under 7,500 miles per year, ask your insurer about low-mileage discounts, which typically save 10 to 15 percent. Some insurers also offer usage-based programs where they track your actual driving through an app and adjust your rate based on how safely you drive. These programs can save 10 to 30 percent if you are a safe driver.

Does paying my insurance bill in full instead of monthly save money?

Yes, most insurers offer a small discount (usually 2 to 5 percent) for paying your annual premium upfront instead of in monthly installments. Over a year, this might save $20 to $50, depending on your premium. If paying upfront strains your budget, the monthly payment is worth the cost for the flexibility.