Ways to Lower Your Car Insurance Costs

How to reduce what you pay for car insurance

The most direct ways to lower your car insurance bill are to raise your deductible, drop coverage you don't need, ask about discounts your insurer already offers, and shop your rate against other companies every year or two. Most people pay more than they have to because they haven't changed their policy since they bought it, or because they don't know what discounts exist. A single phone call to your insurer or a quote from a competitor often uncovers savings of $200 to $500 a year.

The amount you save depends on your age, driving record, location, the car you drive, and how much coverage you choose. Younger drivers and those with accidents or tickets pay more and have fewer discount options. Older drivers with clean records can save substantially by adjusting coverage limits and deductibles. The strategies below work for most people, but your savings will vary.

Key Takeaways

• Raising your deductible from $500 to $1,000 typically cuts your collision and comprehensive premiums by 15 to 30 percent.
• Bundling your car insurance with home or renters insurance at the same company usually saves 10 to 25 percent on your car policy.
• Most insurers offer discounts for good driving records, low annual mileage, completing a defensive driving course, and paying your bill in full rather than monthly.
• Shopping your rate against at least two other insurers every two years often reveals that a competitor will charge you significantly less for the same coverage.
• Dropping collision or comprehensive coverage on an older car that you own outright can save money, but leaves you unprotected if you cause an accident or your car is damaged.

Raise your deductible to lower your premium

Your deductible is the amount you pay out of pocket when you file a claim. Collision and comprehensive coverage both have deductibles. Raising your deductible from $500 to $1,000 typically reduces your premium by 15 to 30 percent, depending on your insurer and location. Raising it to $2,500 saves even more, though most people choose $1,000 as the middle ground.

The trade-off is that if you cause an accident or your car is damaged by weather or theft, you will pay more before insurance kicks in. This strategy works best if you have savings set aside to cover the higher deductible without hardship. If you rarely file claims and have an emergency fund, a higher deductible is usually worth the savings. If you are living paycheck to paycheck, a lower deductible protects you from a surprise bill you cannot afford.

Bundle your car insurance with other policies

Most insurers offer a discount — typically 10 to 25 percent — when you buy car insurance and home or renters insurance from the same company. This is one of the largest discounts available and requires only a phone call to your current insurer or a quote from a new one that offers both products.

To use this discount, you need to hold both policies with the same insurer. If you already have home or renters insurance elsewhere, moving it to your car insurer may save you money overall even if the home policy costs slightly more. Get a quote for both policies bundled before you switch, so you know the total cost. Some insurers also offer discounts for bundling auto with life insurance or umbrella policies.

Look for discounts your insurer already offers

Most car insurers offer multiple discounts that don't require you to change your coverage or take on more risk. Common ones include discounts for a clean driving record (no accidents or tickets in the past three to five years), low annual mileage (often 7,500 miles or fewer per year), completing a defensive driving course, paying your premium in full rather than monthly, and having safety features like anti-theft devices or automatic emergency braking.

Call your insurer and ask what discounts you may be missing. Many people have already earned a discount but never asked about it. Some insurers also offer discounts for being a good customer (staying with them for multiple years), having a good credit score, or being a student with good grades. A few minutes on the phone can uncover $50 to $150 in annual savings with no change to your policy.

Some insurers offer usage-based or telematics programs where you install an app or device that monitors your driving. If you drive safely, you can earn a discount of 10 to 30 percent. These programs are optional and work best for people who drive predictably and rarely speed or brake hard.

Shop your rate against other insurers every one to two years

Insurance companies use different formulas to calculate your rate, so the same person can pay very different amounts at different insurers. Getting quotes from at least two competitors every one to two years often reveals that you can save hundreds of dollars by switching. Rates also change as you age, your driving record ages, and your car depreciates, so what was the best deal two years ago may not be today.

To shop effectively, use the same coverage limits and deductibles across all quotes so you are comparing the same thing. Most insurers offer quotes online in minutes, and you do not have to provide a phone number or email if you just want to see a price. Once you have two or three quotes, compare the total annual cost, not just the monthly payment. A company with a lower monthly payment might charge more annually if you pay monthly fees.

If you find a better rate elsewhere, contact your current insurer and ask if they will match it. Some will, especially if you have been a customer for several years. If not, switching is straightforward — your new insurer handles most of the paperwork, and you can time the switch to start on the day your current policy renews so there is no gap in coverage.

Drop coverage you may not need

If you own your car outright and it is older, you may be able to drop collision and comprehensive coverage and keep only liability. Liability is required by law in every state and covers damage you cause to someone else's car or property. Collision covers damage to your own car if you cause an accident. Comprehensive covers damage from weather, theft, vandalism, or hitting an animal.

Dropping collision and comprehensive saves money but leaves you unprotected. If you cause an accident, you pay for repairs yourself. If your car is stolen or damaged by a storm, you absorb the loss. This strategy makes sense only if your car is worth less than the cost of collision and comprehensive premiums over several years, and if you can afford to replace or repair it yourself. Most lenders and leasing companies require you to carry collision and comprehensive, so you cannot drop them if you have a loan or lease.

You cannot drop liability coverage — it is legally required. The minimum varies by state, but most states require at least $25,000 per person and $50,000 per accident for bodily injury, and $25,000 for property damage. Many insurers recommend higher limits, especially if you have assets to protect.

Pay attention to your driving record and credit score

Your driving record and credit score both affect your rate. A single accident or ticket can raise your premium by 20 to 40 percent and stay on your record for three to five years. Avoiding accidents and traffic violations is the single most effective way to keep your rate low over time.

Your credit score also influences your rate at most insurers. People with lower credit scores pay more, even if they have a clean driving record. Paying your bills on time and keeping credit card balances low helps your score and your insurance rate. Some states limit how much insurers can use credit score to set rates, so the impact varies by location.

Frequently Asked Questions

Will switching insurance companies hurt my credit score?

No. Switching car insurance does not affect your credit score. Insurance companies do not report to credit bureaus, and shopping for quotes does not create a hard inquiry on your credit report. You can get quotes from as many insurers as you want without any impact on your credit.

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. The exact savings depend on your age, driving record, location, and the insurer. Get a quote at your current deductible and at $1,000 to see your specific savings.

Do I need collision and comprehensive coverage?

If you have a loan or lease, your lender requires it. If you own your car outright, it is optional but recommended. Dropping it saves money but leaves you unprotected if you cause an accident or your car is damaged by weather or theft. The decision depends on your car's value and your ability to pay for repairs yourself.

What discounts do most insurers offer?

Most insurers offer discounts for a clean driving record, bundling policies, paying in full, low mileage, completing a defensive driving course, and having safety features. Some offer discounts for good credit, being a student with good grades, or staying with them for multiple years. Call your insurer to ask what you may be missing.

How often should I shop for new insurance?

Every one to two years is a good rule. Your rate changes as you age, your driving record ages, and your car depreciates. Competitors' rates also change. Getting quotes every couple of years ensures you are not overpaying compared to what other insurers would charge for the same coverage.