How to Lower Your Car Insurance Costs

The fastest way to cut your premium is to compare quotes from multiple insurers

Car insurance prices vary widely between companies for the same driver and the same car. One insurer might charge you $1,200 a year while another charges $1,800 for identical coverage. The only way to find the lowest price is to get quotes from at least three to five different insurers and compare them side by side.

You can get quotes online in minutes without committing to anything. Most insurers let you enter your information once and see a price estimate before you provide payment details. Write down the quote amounts and the coverage limits (liability, collision, comprehensive) so you can compare apples to apples — a cheaper quote with lower coverage limits is not actually cheaper.

The companies that advertise most heavily are not always the cheapest. Regional insurers and smaller national companies often undercut the big names. Check quotes from at least one insurer you have not heard of, because that is where you often find the best rate.

Key Takeaways

• Getting quotes from at least three to five insurers is the single most effective way to lower your premium, since prices vary by hundreds of dollars for the same coverage.
• Raising your deductible from $500 to $1,000 typically cuts your collision and comprehensive costs by 15 to 30 percent, but only if you have cash set aside to pay that deductible if you need it.
• Bundling your car insurance with home or renters insurance usually saves 10 to 25 percent on your car policy, and many insurers offer this discount automatically once you add a second policy.
• Discounts for good driving records, completing a defensive driving course, and paying your premium in full upfront are common across most insurers and can stack on top of each other.
• Dropping collision or comprehensive coverage on an older car (usually worth less than $10,000) can cut your premium significantly, but you lose the ability to recover repair costs if you cause an accident or hit something other than another car.

Raise your deductible if you have emergency savings

Your deductible is the amount you pay out of pocket when you file a claim. The most common deductibles are $500 and $1,000, though some insurers offer $250 or $2,500 options. Raising your deductible lowers your monthly or annual premium because the insurance company is taking on less risk.

Moving from a $500 deductible to a $1,000 deductible typically reduces your collision and comprehensive coverage costs by 15 to 30 percent, depending on your age, location, and driving record. The tradeoff is that if you cause an accident or your car is damaged by weather or theft, you will pay $1,000 before insurance covers the rest.

Only raise your deductible if you have at least that amount in savings and can afford to pay it without going into debt. If you cannot cover a $1,000 deductible without borrowing money, stick with $500 or $250. A lower premium is not worth the financial stress of a surprise repair bill you cannot pay.

Bundle car insurance with home or renters insurance

Most insurers offer a discount when you buy multiple policies from them — typically 10 to 25 percent off your car insurance premium. This is called bundling or a multi-policy discount. You do not have to switch your home or renters insurance to a new company; many insurers will give you the discount if you move just your car policy to them.

Before you switch, get a quote for both your car and home or renters insurance bundled together. Compare that bundled price to what you currently pay for both policies combined. Sometimes the discount is large enough to offset slightly higher rates on one of the policies, and sometimes it is not. The math matters more than the discount percentage.

Ask the insurer whether the discount is automatic or whether you need to request it. Some companies explore it right away; others require you to call or log into your account to set up it.

Look for discounts you may already may have access to for

Most insurers offer discounts that do not require you to change your behavior or buy additional products. Common ones include discounts for a clean driving record (no accidents or traffic violations in the past three to five years), paying your premium in full upfront instead of monthly, and setting up automatic payments from your bank account.

Some insurers offer discounts for completing a defensive driving course, either online or in person. The course usually takes a few hours and costs $20 to $50, but the discount often saves you more than that over the course of a year. Ask your insurer whether they recognize courses from any specific provider before you enroll.

Other discounts vary by company: some offer discounts for low annual mileage, for having safety features on your car, for being a student with good grades, or for being a member of certain professional organizations or alumni associations. Call your current insurer and ask what discounts you have not yet claimed. You may already may have access to for several.

Drop collision and comprehensive coverage on older cars

Collision coverage pays for damage to your car if you cause an accident. Comprehensive coverage pays for damage from weather, theft, vandalism, and hitting an animal. Together, they are called full coverage. If your car is worth less than $10,000, the cost of these coverages may be more than the value of the car itself.

Calculate whether it makes sense to keep these coverages by looking at your car's current market value (check Kelley Blue Book or NADA Guides for a realistic estimate) and comparing it to your annual premium for collision and comprehensive. If your car is worth $8,000 and collision and comprehensive together cost $600 a year, you are paying 7.5 percent of the car's value annually just for those two coverages. Over time, you may pay more in premiums than the car is worth.

The risk of dropping these coverages is that if you cause an accident or your car is damaged by weather or theft, you will have to pay for repairs yourself. Only drop these coverages if you can afford to replace or repair your car without insurance. If you have a car loan or lease, your lender will require you to keep full coverage, so you cannot drop these coverages until the loan is paid off.

Pay attention to your credit score and driving record

Most insurers use your credit score to calculate your premium, even though it has nothing to do with how safely you drive. A higher credit score typically means a lower premium. If your credit score is low, paying down debt and making on-time payments will improve it over time, which will eventually lower your insurance costs.

Your driving record has a direct impact on your premium. Accidents and traffic violations stay on your record for three to five years, depending on your state and the severity of the violation. A single accident or speeding ticket can raise your premium by 20 to 40 percent. The best way to keep your premium low is to avoid accidents and traffic violations.

If you have an accident or violation on your record, ask your insurer when it will stop affecting your rate. Once it ages off your record, your premium should drop automatically, though you may need to call and ask for a new quote to see the savings.

Consider usage-based insurance if you drive infrequently

Some insurers offer usage-based insurance programs that track how much you drive, how fast you drive, and when you drive. You install an app on your phone or a small device in your car, and the insurer uses that data to calculate your premium. If you drive safely and infrequently, you can save 10 to 30 percent.

These programs are most valuable if you work from home, use public transportation most days, or have a short commute. If you drive 5,000 miles a year instead of 15,000, the savings can be substantial. However, if you drive frequently or have a long commute, the savings may be smaller or nonexistent.

Ask the insurer exactly what data they collect and how it affects your rate. Some programs only track mileage; others track speed and hard braking. Understand what you are agreeing to before you enroll, and ask whether you can opt out if you change your mind.

Frequently Asked Questions

How often should I get new quotes to make sure I am still getting the best rate?

Get new quotes every six to twelve months, or whenever your life changes significantly (you move, get married, buy a new car, or have an accident). Insurance companies adjust their rates regularly, and a company that was cheapest last year may not be cheapest this year. Switching insurers takes only a few minutes and can save you hundreds of dollars annually.

Will switching insurance companies hurt my credit score?

No. Switching car insurance is a soft inquiry, not a hard inquiry, so it does not affect your credit score. You can get quotes from as many insurers as you want without any impact on your credit. Hard inquiries only happen when you explore for credit like a loan or credit card.

What if I have a bad driving record — can I still find affordable insurance?

Yes, but your options are more limited and your rates will be higher. High-risk insurers specialize in drivers with accidents, violations, or DUIs. Get quotes from multiple high-risk insurers, because their rates vary widely. As your driving record improves and violations age off, shop around again — standard insurers may offer you better rates once you are no longer considered high-risk.

Is it worth paying more for a lower deductible?

Only if you cannot afford to pay a higher deductible out of pocket. A $250 deductible costs more per month than a $1,000 deductible, but the monthly savings from the higher deductible usually add up to more than the extra $750 you would pay in a claim. Unless you expect to file a claim soon, a higher deductible saves money over time.

Do I need full coverage if I own my car outright?

That depends on your financial situation and how much your car is worth. If your car is worth less than $10,000 and you have emergency savings, dropping collision and comprehensive can save you money. If your car is worth more than $15,000 or you do not have savings to cover repairs, keeping full coverage protects you from a large unexpected expense.