Ways to Lower Your Car Insurance Costs

How to reduce what you pay for car insurance

The amount you pay for car insurance depends on factors you control and factors you don't. You cannot change your age or driving history retroactively, but you can change your coverage limits, deductible, how you bundle policies, and which discounts you actually use. Most people pay more than they need to because they haven't revisited their policy since they bought it, or because they don't know which discounts their insurer offers.

The fastest way to lower your bill is to shop around — rates for the same coverage vary significantly between insurers, and some companies offer discounts others don't. After that, the changes that save the most money are raising your deductible, dropping coverage you don't need, and bundling your car and home policies with the same company.

Key Takeaways

• Getting quotes from at least three different insurers for the same coverage usually reveals price differences of $300 to $800 per year for identical protection.
• Raising your deductible from $500 to $1,000 typically cuts your collision and comprehensive premiums by 15 to 30 percent.
• Bundling your car and home insurance with one company often saves 10 to 25 percent on your total premium.
• Discounts for good driving, safety features, low mileage, and paid-in-full policies exist at most insurers but require you to ask or update your profile.
• Dropping collision or comprehensive coverage on older cars worth less than $10,000 can save hundreds annually, though you lose protection against accidents and theft.

Shop quotes from multiple insurers for the same coverage

Insurance companies price risk differently. One insurer might charge $1,200 a year for a 35-year-old driver with one accident five years ago; another might charge $950 for the same person and car. These differences persist year to year, so the cheapest company last year may not be the cheapest this year.

To compare fairly, get quotes from at least three insurers using the same coverage limits and deductible for each quote. Most insurers offer quotes online in 10 to 15 minutes. Write down the exact limits you chose — liability coverage amounts, deductible, whether you included collision and comprehensive — so you know you're comparing the same thing across companies.

Common insurers to check include State Farm, Geico, Progressive, Allstate, USAA (if you're military or a veteran), and regional companies that serve your state. Some insurers specialize in high-risk drivers or low-mileage drivers, so if either applies to you, search for companies that target that group.

Raise your deductible if you have emergency savings

Your deductible is the amount you pay out of pocket when you file a claim for collision or comprehensive coverage. A higher deductible means the insurance company pays less per claim, so they charge you less in premiums.

Moving from a $500 deductible to $1,000 typically saves 15 to 30 percent on collision and comprehensive premiums combined. Moving to $2,500 saves even more, but only if you have that amount in savings and can actually pay it if you need to file a claim. If you cannot afford the deductible, raising it creates a false economy — you'll save on premiums but won't be able to use the insurance.

This change works best if you have a solid emergency fund and you drive carefully. If you have multiple accidents or claims in a few years, a high deductible becomes expensive quickly.

Bundle car and home insurance with one company

Insurers offer discounts — often 10 to 25 percent — when you insure your car and home with the same company. Some also bundle renters insurance or umbrella policies into the discount.

To use this strategy, get a quote for your home or renters insurance from the same company you're considering for car insurance, then compare the bundled total against what you currently pay. Sometimes the bundled price is cheaper even if one of the individual policies costs slightly more than your current provider. Sometimes it's not — bundling only saves money if the company's rates are competitive to begin with.

If you already have home insurance elsewhere, contact that company and ask what they'd charge to add your car. Then compare that bundled quote against your current car insurance bill. You may find it's worth switching your car insurance to bundle, or worth switching both policies to a new company entirely.

Drop collision or comprehensive coverage on older vehicles

Collision coverage pays for damage to your car when you hit something or something hits you. Comprehensive coverage pays for theft, weather, vandalism, and animal strikes. Neither is required by law, though your lender will require both if you're financing or leasing a car.

If you own your car outright and it's worth less than $10,000, the cost of these coverages may exceed what you'd receive in a claim. For example, if your car is worth $6,000 and collision costs $400 a year, you'd need to go 15 years without an accident to break even. If you have savings to replace the car, dropping these coverages can save $400 to $800 annually.

Before you drop them, check what your car is actually worth using the National Association of Automobile Dealers (NADA) Guides or Kelley Blue Book. If you still owe money on the car, your lender won't let you drop these coverages, so contact them first.

Look for discounts you're not currently using

Most insurers offer discounts for good driving records, safety features in your car, low annual mileage, paying your premium in full rather than monthly, completing a defensive driving course, and bundling policies. Some offer discounts for being a student with good grades, working in certain professions, or being a member of certain organizations.

Log into your insurer's website or call them and ask which discounts you currently have and which ones you're missing. You may discover you're paying for a safety feature discount that requires you to install a monitoring app — once you install it, the discount activates. Or you may find that completing a one-hour online defensive driving course saves you $50 to $100 a year.

If you've had no accidents or tickets in the past three to five years, ask about accident forgiveness or a safe driver discount. If you work from home or drive very little, ask about low-mileage discounts — some insurers offer them for drivers under 7,500 miles per year.

Adjust your coverage limits based on your assets

Your liability coverage limits determine how much the insurance company will pay if you cause an accident and injure someone or damage their property. State minimum liability limits are often $25,000 to $50,000 per person, but if you have significant assets — a house, savings, retirement accounts — you may want higher limits to protect them.

If you have few assets and little income, state minimum limits may be sufficient. If you own a home or have substantial savings, carrying $100,000 to $250,000 in liability coverage is common. The cost difference between state minimums and higher limits is usually $20 to $50 per year, so the protection is inexpensive relative to what you're protecting.

You can also add an umbrella policy, which provides additional liability coverage beyond your car and home insurance limits. Umbrella policies typically cost $150 to $300 per year for $1 million in coverage and are worth considering if you have significant assets.

Frequently Asked Questions

How often should I shop for new car insurance quotes?

Once a year is standard, ideally before your policy renews. Rates change annually based on claims data, and new discounts appear. If you've had a major life change — moved, gotten married, bought a new car, had an accident — get new quotes when ready, as your rate may have changed significantly.

Will shopping for quotes hurt my credit score?

No. Insurance quotes are considered soft inquiries and do not affect your credit. Getting multiple quotes in a short period (usually 14 to 45 days, depending on the credit bureau) counts as a single inquiry for credit scoring purposes.

What's the difference between actual cash value and agreed value for comprehensive claims?

Actual cash value pays what your car is worth at the time of the loss, accounting for depreciation. Agreed value, offered by some insurers, locks in a value you both agree on when you buy the policy. Agreed value is more common for classic or collectible cars and typically costs more in premiums.

Can I get a discount for paying my insurance in full instead of monthly?

Most insurers offer a small discount — usually 3 to 10 percent — for paying your annual premium in full rather than in monthly installments. The discount varies by company, so ask when you get your quote.

Does my credit score affect my car insurance rate?

Yes, in most states. Insurers use credit-based insurance scores (different from credit scores used for loans) to set rates. Improving your credit score over time can lower your insurance costs, though the effect is smaller than factors like driving history and age.