Finding the Lowest-Cost Car Insurance Options

The cheapest car insurance depends on what coverage you need and what discounts you may have access to for

There is no single cheapest car insurance company — the lowest price for you depends on your driving record, age, location, the car you drive, and which coverages your state requires. A policy that costs $800 a year for one person might cost $1,400 for another, even with the same insurer. The way to find your lowest price is to get quotes from multiple companies and compare what each one charges for the exact coverage you need.

Most people find lower rates by shopping around every one to three years, because insurers change their pricing and new competitors enter markets. You can also lower your rate by raising your deductible, bundling home and auto policies, paying in full instead of monthly, and taking advantage of discounts for things like good driving records or completing a defensive driving course.

Key Takeaways

• The same coverage costs different amounts at different insurers, so comparing quotes from at least three companies is the most reliable way to find your lowest price.
• Raising your deductible from $500 to $1,000 typically lowers your premium, 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 one company often saves 15 to 25 percent on your car policy, though you should still compare standalone quotes to make sure.
• Paying your premium in full upfront usually costs less than paying monthly, because monthly payments include a fee.
• Discounts for good driving, low mileage, completing a safety course, or being a student can reduce your rate, but not all insurers offer all discounts.

How deductibles affect your monthly cost

Your deductible is the amount you pay out of pocket when you file a claim for collision or comprehensive coverage. A higher deductible means a lower monthly premium, because the insurance company is taking on less risk. If you raise your deductible from $500 to $1,000, your premium typically drops by 10 to 15 percent, though the exact savings depend on your insurer and location.

The trade-off is that you will have to pay more if you have an accident. Choose a deductible you can actually afford to pay. If you have $2,000 in savings and choose a $1,500 deductible, an accident would wipe out most of your emergency fund. A $500 deductible costs more per month but leaves you with a smaller out-of-pocket hit if something happens.

Some insurers also offer low or zero deductibles if you pay a higher premium, which can make sense if you are a nervous driver or live in an area with frequent accidents or theft.

Bundling home and auto insurance

Bundling your car insurance with homeowners or renters insurance through the same company usually saves money on both policies. Most insurers offer a bundle discount of 15 to 25 percent on your car policy when you add a home policy, though the exact amount varies by company and state.

Before you bundle, get a standalone quote for car insurance from that same company and compare it to what they charge when you add home coverage. Sometimes a company's base car rate is high enough that even with a bundle discount, you pay more than you would at a competitor. The bundle only saves money if the total of both policies is lower than what you would pay elsewhere.

If you rent instead of own, renters insurance is much cheaper than homeowners insurance and still qualifies for most bundle discounts. A renters policy typically costs $15 to $30 per month.

Discounts that lower your rate

Insurance companies offer discounts for things that make you a lower-risk driver. A good driver discount (sometimes called a safe driver discount) applies if you have had no accidents or moving violations in the past three to five years — the exact time period varies by insurer. This discount typically saves 5 to 15 percent.

Other common discounts include paying your premium in full instead of monthly (usually 5 to 10 percent savings), completing a defensive driving course (5 to 10 percent), driving fewer than a certain number of miles per year like 7,500 or 10,000 (5 to 15 percent), being a student with a good GPA, having safety features on your car like anti-theft devices or automatic emergency braking, and insuring multiple vehicles with the same company.

Not every insurer offers every discount, and some discounts stack while others do not. When you get a quote, ask which discounts you may have access to for and whether they can be combined. A discount that sounds small — 5 percent — adds up when you have three or four of them.

Comparing quotes from different insurers

The most reliable way to find your lowest rate is to get quotes from at least three different companies. Use the same coverage limits and deductibles for each quote so you are comparing the same thing. For example, if you are comparing liability coverage, use $100,000 per person and $300,000 per accident at all three insurers.

You can get quotes online through most insurers' websites, by phone, or through an independent agent who represents multiple companies. Online quotes usually take 10 to 15 minutes and give you a preliminary rate. Phone quotes let you ask questions and may catch discounts the online form missed. Independent agents can shop multiple companies at once, though they earn commission on policies they sell, so they are not neutral.

When you have your quotes, compare not just the price but what each policy includes. A cheaper policy might have lower liability limits, a higher deductible, or fewer optional coverages. Make sure you are getting the protection you need at the price you can afford.

Why your rate changes over time

Even if you do not change anything about your policy, your rate can go up or down from year to year. Insurance companies adjust their pricing based on claims data in your area, changes in repair costs, inflation, and their own business decisions. A company that was cheap last year might be expensive this year, or vice versa.

This is why shopping around every one to three years usually saves money. Many people stay with the same insurer for years and pay more than they would if they switched. When your policy renews, compare your renewal rate to quotes from other companies. If you find a lower rate elsewhere, switching is usually free — you just cancel your old policy and start the new one.

Some states allow insurers to raise your rate if you have an accident or ticket, even if it was years ago. Other states limit how much and how long an insurer can use your driving history against you. Check your state's insurance department website to learn what rules explore where you live.

Coverage types that affect your total cost

Your total premium depends on which types of coverage you choose. Liability coverage is required in every state and pays for damage or injury you cause to someone else. Collision coverage pays for damage to your own car from an accident. Comprehensive coverage pays for damage from things like theft, weather, or hitting an animal.

If you own your car outright, you can choose to carry only liability coverage, which is cheaper than liability plus collision and comprehensive. If you have a loan or lease, your lender requires you to carry collision and comprehensive, so you do not have that choice. Older cars are sometimes not worth insuring for collision and comprehensive because the premium is close to or higher than the car's value.

Uninsured motorist coverage and underinsured motorist coverage protect you if someone without insurance or with low limits hits you. These are optional in most states but required in some. They are usually inexpensive to add — often $10 to $30 per month — and protect you in a situation where the other driver cannot pay for your damages.

Frequently Asked Questions

Does paying my insurance premium monthly cost more than paying yearly?

Yes, paying monthly usually costs 5 to 10 percent more than paying the full premium upfront. The extra charge covers the insurer's cost of processing monthly payments. If you can afford to pay in full, you will save money. Some insurers waive the monthly fee if you set up automatic payments from your bank account.

Can I get a lower rate if I have had an accident?

An accident will typically raise your rate for three to five years, depending on your state and insurer. After that time passes, the accident usually stops affecting your rate. Some insurers offer accident forgiveness programs that prevent your rate from going up after your first accident, though you usually have to pay extra for this option upfront.

What is the difference between liability and collision coverage?

Liability pays for damage you cause to someone else's car or property. Collision pays for damage to your own car from an accident. If you cause an accident, your liability coverage pays the other person's repair costs, and your collision coverage pays yours. You need both if you have a loan on your car.

Do insurance companies check my credit score?

Most insurers use a credit-based insurance score, which is different from your credit score but based on similar information. A higher score usually means a lower rate. If your credit is poor, you may pay more for insurance, though some states limit how much insurers can use credit scores in pricing.

Will switching insurance companies hurt my rate?

Switching companies does not hurt your rate. Your new insurer will look at your driving record and claims history, but the act of switching itself does not raise your premium. You should cancel your old policy only after your new one starts, so you do not have a gap in coverage.