With so many ways to find cheap car insurance, drivers throughout the United States shouldn’t have to overpay for coverage. Whether you have a good or bad driving history, a teen or college student driver on your policy, or multiple vehicles insured, lowering your premiums is nearly always possible.
Car insurance is a regular line item on your monthly budget. Finding a more cost-effective option can help you save money or give you more flexibility with your budget.
We'll review what affects premium rates as well as nine savings strategies.
Insurers consider many things when issuing policies and determining rates. These factors can vary based on where you live.
For example, California restricts the use of credit scores when underwriting car insurance policies.
Since many things can affect your rate, determining which ones have the most impact will make it easier to find savings opportunities.
"Basically it'll come down to: How old are you, where are you, how much do you drive, and what's your driving record? In other words, do insurers think you are more inclined to do something risky? Are you in a place with lots of accidents, and how much time are you spending on the road?” says Stuart Winchester, licensed insurance broker and Marble founder and CEO.
While understanding how insurers assess risk as Winchester mentions can help you identify ways to lower your overall risk, reducing your risk can take time. Striking a balance between lowering your risk and living your life also matters. You still need to get to work, and there may not be much you can do about your commute.
We'll cover additional ways to save beyond lowering your risk below.
Most states require a set amount of coverage for drivers to carry. These rules vary by state and typically include liability, medical payments or personal injury protection, or uninsured/underinsured motorist coverage.
Obviously, carrying the minimum required coverage is usually the cheapest option. However, it may not meet your coverage needs and increase your risk of being sued.
If you're a high-income earner, you'll want to have much higher liability coverage limits. Higher limits generally result in a higher cost.
Auto insurers offer other types of coverage including collision and comprehensive coverage. Collision coverage helps pay for repair costs for your car in a collision.
Comprehensive coverage also helps pay for other types of damage to your car like hail, fire, vandalism, flood, or a collision with an animal.
In some cases, it may be worthwhile to drop collision and comprehensive coverage. For example, cars that are worth less than the deductible or would cost more to fix than the car's worth are good candidates for not getting collision or comprehensive coverage. You can put the savings on the premium towards your savings for a new car.
If you're leasing or have a loan on your car, you'll likely be required to carry this coverage so you can keep covering monthly payments.
Car insurance is like any other product or service — the drivers who shop around and compare reviews and prices always get the best deals. This starts with the fact that you should never assume one company is cheaper or better than another.
Most providers spend hundreds of millions of dollars a year convincing consumers they offer the lowest rates or the best coverage. However, the only way to know for sure is to get an insurance quote online and compare policies, coverage, premiums, and service.
Just remember you don’t absolutely need to switch insurers if you find a lower price elsewhere — you can simply use the competing bid as a negotiating tool to bring down the rate at your current company.
If rates seem too good to be true, they may be. You should always check an insurer's financial strength ratings, brand reputation, and responses to claims.
Financial strength ratings show how financially stable an insurer is. You don't want a policy from an insurance provider that may go bankrupt and be unable to pay your claim.
You can check a company's brand reputation to get a sense of customer satisfaction levels. You can learn more about formal complaints by checking NAIC's complaint index. Customer reviews are also a helpful, informal read on how well an insurer treats its customers. (Reviews on Best Company must pass a seven-point verification process before publication, so you can trust reviews on our site.)
Working with a trusted and independent insurance agent can also help you identify trusted insurers. They'll have a good sense of an insurer's reputation with claim payments and understand the market, so you'll have a sense of whether you're choosing a good insurer and if your rate is competitive.
As you compare costs, be sure to understand the typical rates in your area. Drivers may be tempted to compare their current premiums to the overall national average or family and friends who live in different states. Unfortunately, car insurance rates are hyper-local, meaning where you live plays a huge role in your cost of coverage.
For instance, different states have different levels of required coverage mandated by state regulations and laws. Similarly, different states, cities, and zip codes can have vastly different insurance risks. To determine whether you are paying too much for your policy, you’ll need to compare average car insurance rates by state.
Some insurance companies won’t automatically apply all the discounts you qualify for. In some cases, you may need to request the discounts and possibly prove that you meet the requirements. Here are some discounts to look for:
A long list of discounts won’t necessarily yield the cheapest insurance, so always compare the final price.
Many insurers offer driver monitoring programs, typically through an app. When you participate in this program, you may receive a small discount initially just for participating. Once the initial period has passed, you'll receive a rate customized to your driving habits.
If you're a safe driver, these programs can save you lots of money. If your driving habits aren't as good, you may end up with a higher rate. These programs are designed to reward safe drivers, and most offer helpful suggestions for improving your driving.
If you’re a good driver and don’t file many small claims, opting for a higher deductible makes sense. Or, if you simply want to save money on your annual cost of car insurance, then you should consider raising your deductible.
Your deductible may be increasing your premiums substantially if you’ve opted for a $250 deductible or have a low amount set for your comprehensive and collision coverage. A change from $250 to $500 can save you money.
"Insurance companies generally offer different rates based on deductible amounts, so a higher deductible can actually lower the cost of your auto insurance premium," advises Solari, Sigo co-founder and CEO.
Be careful when increasing your deductible because it puts more financial responsibility on you in the event of a claim. Make sure your deductible is affordable.
Most Americans may not think about it in advance, but car insurance is a monthly or annual expense of car ownership.
If you’re considering an auto loan and are leaning towards one that’s on the edge of your budget, then insurance costs may push you outside of your comfort zone.
"One big factor is how much your car costs to begin with. More expensive cars will be more expensive to replace and therefore more expensive to insure. The cost of repairs is another factor to consider," advises Jake McKenzie, Auto Accessories Garage content manager.
As you're looking at cars, pay attention to repair costs and compare insurance rates on different new cars before arriving at the dealership, especially if you want to purchase a sports car or luxury vehicle.
Beyond replacement and repair costs, a car's safety ratings and features also have an effect:
"The cost of your car is a major factor in the cost to insure it, but other variables are taken into consideration. These include the likelihood of theft (where you keep it overnight), the cost of repairs, its engine size, and the overall safety record of the car. Cars with high-quality safety equipment might qualify for premium discounts, so always mention any features your car has," says John Peterson, Safe Drive Gear editor.
Thoroughly researching car safety ratings, features, insurance costs, and more will help you make a smart purchase decision that meets your transportation and financial needs.
While some states prohibit the use of your credit score as a car insurance rating factor, most states allow companies to factor this variable in. The logic behind the idea is that individuals who are financially responsible tend to be safer drivers. If you have bad credit, be cognizant that it may be affecting more than just your ability to get a home loan from the bank.
Similarly, if you’ve recently taken steps to significantly improve your credit score, make sure your insurance company is using your updated record. It may be possible to ask them to pull a fresh report to demonstrate that you’ve fixed your credit history.
Perhaps this strategy goes without saying. However, you can always improve your driving, especially if you don't have a great driving record.
Avoid speeding. Follow road signs and traffic lights. Over time, you'll show you're a lower-risk driver and qualify for lower rates.
Insurers check your claims history when deciding whether or not to insure you and at what cost. Be careful about the claims you file. In some cases, too many claims can mean that an insurer won't issue a policy.
Knowing how insurers assess risk by looking at the car and driver and using the strategies above will help ensure savings when you buy car insurance.
Don't get so caught up in savings that you compromise on coverage. Get the coverage you need so you have financial peace of mind while you're on the road.
November 8th, 2021
August 17th, 2022
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