How to Lower Your Car Insurance Premiums

The countrywide average cost of car insurance is around $1,070 annually, or $89 per month, according to estimates from the Insurance Information Institute. The NAIC and AAA somewhat agree, claiming the nationwide cost of full coverage insurance at $1,200 per year, or around $100 a month. These figures are just estimates that make a lot of assumptions about both the vehicle being insured and its driver. What you’ll actually pay for car insurance will be determined by factors such as your age, driving history, and location as well as your car’s age, value, and safety record.

The best way to understand your car insurance costs will be to get rate quotes from several insurance companies in your area. In addition to the initial cost of coverage, also evaluate each underwriter by its claims process, online platform, agent network, whether or not it has a usage-based telematics program, and the number of discounts offered. When you make multiple providers compete for your business, you are more likely to get the best deal possible.

Insurance rates can vary quite a bit from one provider to the next, so it pays to shop around. It’s a good practice to get quotes from three to five insurers before making a decision. That’s because comparison shopping will always yield a lowest rate.

Remember, however, that the cheapest car insurance isn’t always the best insurance. You should prioritize providers based on your needs. For example, do you have a teen driver in your household? Do you drive for Uber or Lyft on the side? Maybe you’re financing a new car, and the lender requires full coverage until the auto loan is paid in full. There is a lot of variation among insurance companies, and one might suit your particular needs better than another.

Even if you already have a policy, rate shopping every year or so is a good idea. Your credit score may have improved, which could lower car insurance costs. Or perhaps you can take advantage of a new customer discount when you switch to a new provider.

Your deductible is the amount of money you need to pay for each claim before your insurance provider contributes towards damages due to accident, theft, or otherwise. While every policyholder will have their own deductible, the typical range is between $250 to $1,200.

The higher your deductible, the more you pay per claim. For example, if your comprehensive deductible is $500 and repairs cost $2,000, your provider would pay $1,500. But if your deductible is $1,000, then your insurance only pays out $1,000. 

In most cases, higher deductibles mean lower insurance premiums. Speak with your agent about how much money you can save by increasing yours. Be sure to put some of the savings aside so you can cover your increased responsibility in case of a claim.

Car insurance companies have a special talent when it comes to selling you auto coverage. If you were nudged into purchasing a policy with all the bells and whistles, then you may be able to save some money by ditching the extras that you don’t necessarily need, such as accident forgiveness or rental reimbursement.

Drivers with an older car or truck can also consider dropping their collision and comprehensive coverage. As a general rule, if your car is worth less than 10 times your premium, then full coverage may not be worth it. For example, if your Mazda sedan is only worth $2,000, but you’re also paying $2,000 every 10 months to insure it, the extra protection might not be cost effective. Consult Kelly Blue Book to determine your car’s value.

Insurance carriers offer policy discounts to incentivize customer loyalty by lowering the cost of auto insurance premiums. Depending on the company, you can earn discounts for everything from smart account management and anti-theft devices to insuring multiple vehicles and buying your policy online. Bear in mind that availability varies by provider.

The good news is that you can stack as many discounts as possible, which can mean big savings for some policyholders. Indeed, Progressive claims that its customers save an average of $700 each year with its discounts. Nationwide says that the average savings for its multipolicy discount alone is $646.

Speak with your agent to see what kind of discounts you qualify for, especially if it's been several years since you originally purchased your policy. Your provider may have introduced new discounts, changed eligibility requirements of existing ones, or your customer attributes may have also developed for the better.

Many households have multiple insurance needs, such as auto, homeowners, life, and motorcycle, to name a few. When you bundle all of those needs with a single provider, you’re often rewarded with special savings. 

As an example, when you bundle home and auto insurance with Allstate, you stand to save up to 25 percent on your insurance premium. State Farm claims most customers save $1,127 with their home and auto bundle. Obviously, your mileage will vary with these offers. But speak with a few providers to see which can quote you the best price on a bundled policy.

Insurance companies will take into account your driving history when pricing your premium. Drivers with speeding tickets or moving violations will undoubtedly pay more for the same coverage as someone with a clean driving record. Those with a DUI will have trouble finding a provider to insure them at all, let alone finding affordable coverage.

In addition, some providers may reward your good driving record with special discounts. In its fine print, Travelers Insurance says you can save 20 to 40 percent for safe driving, depending on your state of residence. If you’ve had a few blemishes fall off your record, it's a good idea to circle around with your provider to see if they can extend further savings to you.

If you’re chasing lower car insurance premiums, going back to school might just be what you need. Safe-driving education courses are typically designed with older and younger drivers in mind, as they tend to have higher premiums. Nonetheless, defensive driving discounts may be furnished to drivers of any age, especially in states that require insurance companies to offer them.

It’s worth noting that you’ll need to complete a defensive driving course that is approved by your provider and, in some instances, your state DMV. Your insurer should have resources to help you identify eligible courses. For example, Geico has an online tool to help its customers find an approved program.

Some policyholders can enjoy lower car insurance costs for their good credit scores. While banks and lenders will use your credit history to predict the odds that you’ll default on a loan, insurance carriers may use your credit to forecast the likelihood that you’ll file a claim.

As a rule of thumb, higher credit scores equal cheaper auto insurance. Those with poor credit will pay more. So, if your credit score has improved since you originally purchased your policy, it could be a good reason to get a new round of rate quotes from several providers. 

Keep in mind that states such as California, Hawaii, Maryland, and Massachusetts have bans on the use of credit-based insurance. Furthermore, several states—Alabama, Delaware, Florida, New Mexico, Oklahoma, Texas, Vermont, and Washington—forbid providers from “using a lack of credit history as a factor for insurance premiums,” according to the National Conference of State Legislatures.

Usage-based programs are all the rage in the insurance industry because not only do they help mitigate policyholder risk, but they give underwriters a new way to help customers lower car insurance costs. 

Usage-based insurance policies provide a personalized rate by monitoring your driving behavior, data such as speed, frequency, braking, miles driven, cornering, and acceleration. Basically, the safer you drive, the more you’ll save.

Most major providers offer their own version. Nationwide’s SmartRide, State Farm’s Drive Safe and Save, Geico’s DriveEasy, and Progressive’s Snapshot are but a few of the options in the marketplace.

Pay-per-mile insurance, or pay-as-you-go insurance, is similar to a usage-based program but not identical. Both types of insurance factor in the number of miles driven into your premium, but pay-per-mile insurance generally determines your pricing solely on a base rate and a per-mile cost. Other types of telematics data won’t necessarily be factored in, such as braking or cornering.

Pay-per-mile provider Metromile claims that for low-mileage drivers, the savings can be big. In fact, if you drive around 10,000 miles each year, the estimated savings with Metromile is $541 over a traditional car insurance policy. That savings jumps to $947 when you drive fewer than 2,500 miles annually.

Circumstances can change for both you and your provider. If you purchased your policy years ago, then you may now personally qualify for a discount that you weren’t eligible for earlier. Likewise, your provider may now have new safe-driving programs or non-discount deals that it didn’t previously. Talk to your agent to see if there are any additional savings to be had.

You can also simply ask your provider for a lower rate. It doesn’t hurt to ask. If your insurance company knows you are considering other options, it may extend discounts, promotions, or some other type of perk to sweeten your policy.

Many people purchase fuel-efficient vehicles, electric cars, and hybrids to save on energy costs. Is it really so silly to downsize to an insurance-friendly car or truck to lower costs? Some cars are cheaper to insure than others. This is because underwriters consider a vehicle’s value, make, age, body type, and safety record when pricing a policy. They will also predict how much damage an automobile will cause in the event of a traffic accident. Savvy drivers could be in line to save money on both insurance and fuel expenses by choosing a more sensible vehicle.

Most insurance underwriters provide group insurance at a discounted rate as a member or employee benefit. You may be eligible for group rates through your university alumni organization, employer, honorary groups and societies, and professional organizations for journalists, teachers, or accountants.

While it may not make sense to relocate just to save money on car insurance, your location plays a notable role in your policy’s price. Drivers who live in suburbs and rural areas typically pay less for coverage than those in urban neighborhoods. This is because busy cities carry a higher risk of roadway accidents, theft, and vandalism. However, some rural areas that are more prone to storms—such as Tornado Alley—may also carry higher insurance rates. 

Your state of residence could also contribute to your insurance costs. Some states have legislation in place that requires higher coverage limits or additional policies such as personal injury protection or uninsured motorists. These additional protections will usually come with a bigger price tag.

In addition to wisdom, cheaper insurance can also come with age, provided that you maintain a good driving record. Young drivers between the ages of 16 to 25 can sometimes see rates decline after each birthday. Generally speaking, insurance tends to get more affordable every decade afterwards.