Car insurance is a required expense for anyone who drives, but the amount you pay is more negotiable than most people realize. Rates vary widely between companies for the exact same coverage, and most insurers offer discounts that many policyholders never ask about. A few hours of effort can translate into hundreds of dollars in annual savings.
Shop Around Every Year or Two
The single most effective way to lower your car insurance premium is to compare rates from multiple insurers. Loyalty rarely pays in auto insurance — companies often offer their best rates to new customers, and your current insurer has little incentive to reduce your rate if you are not asking.
Get quotes from at least three to five companies, including large national carriers and regional insurers. Make sure you are comparing the same coverage levels and deductibles across all quotes. Many insurers offer online quotes in minutes; an independent insurance agent can also shop multiple carriers for you at no cost.
Raise Your Deductible
Your deductible is the amount you pay out of pocket before insurance covers a claim. Raising your deductible from $500 to $1,000 can reduce your comprehensive and collision premiums by 15 to 30 percent, depending on the insurer and your situation.
This makes most sense if you have an emergency fund to cover the higher deductible if needed, and if you drive a car that is not likely to require frequent claims. Avoid raising the deductible higher than you could comfortably pay in a bad month.
Ask About Every Discount
Most insurers offer discounts that are not automatically applied — you have to ask. Common discounts include:
- Good driver discount — no accidents or violations in the past 3 to 5 years
- Low mileage discount — if you drive significantly fewer miles per year than the average (often below 7,500 to 10,000 miles)
- Bundling discount — insuring your car and home (or renters insurance) with the same company, typically saving 5 to 25 percent
- Senior or mature driver discount — available from many insurers for drivers 55 and older, sometimes requiring completion of a defensive driving course
- Vehicle safety discount — for cars with anti-lock brakes, airbags, anti-theft systems, or advanced safety features
- Paperless and autopay discounts — small but easy savings for enrolling in electronic statements and automatic payment
- Pay-in-full discount — paying your full premium upfront rather than monthly often saves 5 to 10 percent
Consider Usage-Based Insurance
Usage-based insurance programs track your actual driving — mileage, speed, braking, time of day — through a phone app or a plug-in device. If you are a safe, low-mileage driver, these programs can reduce your premium by 10 to 40 percent. Most insurers offer a discount just for enrolling, before your driving is even evaluated.
This is especially worth considering if you drive infrequently — retirees, remote workers, or anyone who uses a car mainly for local errands often pay far more than their actual driving risk warrants under standard pricing.
Review Your Coverage on Older Vehicles
Comprehensive and collision coverage pays for damage to your own car. On an older vehicle with low market value, you may be paying more in premiums for these coverages than the car is worth. A general guideline: if the annual cost of comprehensive and collision exceeds 10 percent of the car’s value, it may not be worth keeping those coverages.
Liability coverage — which pays for damage you cause to others — is required in most states and should always be maintained at adequate levels regardless of your vehicle’s age.
Maintain Good Credit
In most states, insurers use credit-based insurance scores when setting rates. Improving your credit score over time — by paying bills on time and keeping credit card balances low — can meaningfully reduce your insurance premium at renewal. Check your state’s rules, as a few states prohibit the use of credit in insurance pricing.
Money Instructor does not provide tax, legal, or investment advice. This material has been prepared for educational and informational purposes only. You should consult your own advisors regarding your own financial situation.
