How Can You Lower the Cost of Your Auto Insurance?

Buy a Safe Car

Many insurers offer discounts for vehicles with safety features. Before purchasing a new or used car, review the make, model, and features to determine how much you might pay to insure it.

Premiums can be based in part on the following factors:

• Car price
• Cost to repair
• Overall safety
• Likelihood of car theft
• Likelihood of car becoming damaged

Get Usage-Based Insurance

The cost of usage based-insurance is determined primarily on mileage, so you pay as you drive. This coverage is a good option if you don’t have a long commute or if you carpool. Some companies allow you to use a mobile app or monitoring device in your car to record driving behavior. These tools monitor acceleration, braking, distance, and time of day to document good driving habits that will qualify you for discounts.

Drop Unnecessary Coverage

Some policies include features that you don’t need or are unaware of. Eliminate the coverage you can live without while still protecting you and your vehicle. When it’s time to renew your policy, always analyze your coverage to make sure it still fits your needs.

Review your policy for coverages like rental car coverage and roadside assistance that go beyond daily accident coverage. You can often reduce coverage on older cars because insurance payments for collision and comprehensive coverage are limited to the value of your car, which depreciates over time.¹

Ask for Higher Deductibles

Premiums are what you pay an insurance company in exchange for coverage. Deductibles are what you pay on claims before your insurance policy kicks in. Usually, the higher the deductible, the lower the premium.

If you are willing to pay more when you have a claim, you can save on your monthly premium payments. Make sure you have enough funds set aside to cover a higher deductible if you are required to pay a claim.

Bundle Your Coverage

See if your provider has discounts for bundling home, auto, renters, or life insurance. Most insurers will lower costs if you are purchasing more than one type of coverage. Since homes and vehicles are large purchases, they require insurance, likely. Many insurers offer joint coverage for home and auto, which costs less than paying for both policies separately.

Move

Premiums and regulations depend on the state and city you reside in. If you are facing high insurance costs, the state you live in and your proximity to densely-populated urban areas may be to blame.

In 2019, Maine ($788.26), Iowa ($822.99), and Washington ($840.47) had the lowest annual rates for a full-coverage policy.²

Maintain a Good Driving Record

People with clean driving records are statistically less likely to get into at-fault accidents and make claims, thus, companies offer them discounts. Avoiding traffic citations and going years without an accident can lower costs.

Maintain a Good Credit Record

Unless you live in California, Michigan, Hawaii, or Massachusetts, credit scores are factored into insurance premiums. If your credit score is strong, you’ll likely have fewer claims and thus, cheaper insurance. Here are some tips for managing your credit:

• Pay bills on time.
• Don’t obtain more credit than you need.
• Keep your credit balances as low as possible.
• Check your credit report on a regular basis.

Shop Around

1. Gather information on your maximum budget, vehicle specifications, and your area’s providers.
2. Know what coverage you need and your state’s minimum coverage requirements.
3. Using the same information you gathered, request an insurance quote from at least three companies. Make sure you give each company the same information.
4. Compare these quotes.
5. Choose the best coverage for your budget or continue requesting quotes until you find the right match.

Liability Coverage

Liability coverage pays for others’ property damage and/or injuries in accidents where you are at fault. Almost all states require liability coverage.

Liability coverage is made up of two parts: bodily injury (BI) and property damage (PD). Most insurers package these together. The average policy may look something like 25/50/10 ($25,000 BI per person limit, $50,000 BI per accident limit, and $10,000 property damage limit).⁶

Collision Coverage

Unlike liability coverage, collision coverage helps pay for damages to your vehicle in an accident whether or not you were at fault. Collision coverage is optional, but most drivers include it.

Comprehensive Coverage

Comprehensive coverage covers all other damage not related to a collision, whether or not you were at fault. Like collision coverage, comprehensive coverage is optional. If you are financing a car, however, you may be required to purchase collision and comprehensive coverage.

The cost of car insurance is your annual rate, plus additional deductible charges if you file a collision or comprehensive claim. State minimums set the lowest amount of coverage you must have while driving but often are on the low side when it comes to adequate protection for you and your vehicle. The average annual cost for auto insurance in 2020 was $1,047 ($631 for liability, $371 for collision, and $174 for comprehensive).

Coverages

Each state has different minimum requirements for insurance coverage. Beyond those requirements, the more coverages you choose to get, the higher your insurance cost will be.

Age

Age impacts your rates because it indicates driving experience. Statistically, the younger the driver, the more likely an accident is to occur. Any factors that indicate a driver is high-risk will result in higher insurance rates.

Sex

Women are considered lower risk for accidents than men. As a result, women pay less than men for insurance in every state except Massachusetts, Michigan, California, Hawaii, Montana, North Carolina, and Pennsylvania.

Marital Status

Those who are married pay lower rates than single or formerly married people.

Location

Living in densely populated areas also contributes to your rates. The more people on the road, the higher the chance of an accident.

Driving History

If you have points on your license from driving infractions such as speeding or driving under the influence, you could face higher rates. The opposite also applies. If you have a good driving record free of DUIs, at-fault accidents, tickets, and/or moving violations, this can reduce your rate.

Vehicle

Staying safe on the road also applies to the features of your vehicle. Driving a safe car helps prevent severe accidents, which decreases the chances of having to file high claims.

Credit History

Your financial history also plays a big role in insurance rates. Credit scores indicate your responsibility in making payments. Drivers with poor credit scores statistically are more likely to file a claim. Drivers with strong credit scores are less likely to file a claim thus costing insurance companies less.

The company with the lowest rate will depend on your needs and budget, so it pays to compare cheap insurance companies based on your situation. If you don’t land on the perfect match, explore all insurance companies for the best fit.

These companies offer consistently low annual rates:

• USAA
• GEICO
• State Farm

Getting a good deal on insurance can be attractive, but there are risks in cutting costs:

• The coverage won’t be enough for serious accidents.
• You could be left without a car if you can’t afford repairs.
• Low cost may be connected to poor customer service.
• You could be left with high deductible payments.

There is no guarantee you’ll run into these risks, but you will be exposed to possible losses if you seek the lowest premium price.

Saving on auto insurance means more money for the fun things in life. There are numerous discounts and practices for keeping costs low whether you have been driving for decades or embarking on roads for the first time. To get the lowest price stay safe while driving, review your budget and coverage needs whenever it’s time to renew your insurance.