How To Save On Car Insurance: 8 Ways To Lower Car Insurance
There are many ways that you can save on car insurance. It’s just a matter of knowing how.
When you are trying to save money there’s a big difference between the expenses you can cut, and the ones you can’t. You might be able to trim your grocery budget, or cancel some streaming services, or give up those Starbucks coffees that everyone keeps claiming will turn your financial life around. But there are some expenses that are tough to avoid: rent, car payments, certain utilities, and so on.
Your car insurance might be one of those bills you can reduce, although it might take a little extra footwork on your part. No one is going to come knocking on your door to let you know you can lower your rates. But with a little research and effort, you might be able to trim a good chunk off your insurance premiums.
Here are a few ways you can save on car insurance:
Table of Contents
Ask for a discount On Your Insurance Premiums
Your car insurance carrier won’t necessarily tell you about it up front, but there are a lot of potential discounts insurers offer to policyholders. Most of these are based on reducing risk for the insurer (in fact, that’s what most of these tips overall are about). Some possible discounts include:
- A student discount for students with good grades.
- Drivers who take a training or defensive driving course.
- Having anti-theft and safety equipment installed on your vehicle.
- Engineers, teachers, doctors, lawyers, government officials, and other professionals can get what’s called an “affinity discount” for being part of those groups.
- Veteran and military discounts.
- Discounts for driving an electric or hybrid vehicle.
- Low-mileage discounts for people who rarely use their cars.
- Loyalty discounts for staying with your insurer long-term.
There are others, too, so get in touch with your insurer and see what they have to offer!
Keep a clean driving record
Everyone knows that an accident can send your insurance premiums soaring. But having a clean driving record can actually lower your rates as well. The longer you go without being in an accident, the less risk you’ll potentially carry for insurers, and your rates could drop as a result.
Shop and compare Auto Insurance
It never hurts to take some time, once a year or so, to review your insurance and see if you can find a better deal on cheap car insurance somewhere else.
One of two things could happen when you do: you might find coverage that’s just as good for a lower price, or the insurer you’re with now might offer you a better rate if you choose to stay with them. Either way, you stand to win.
Drop coverage you don’t need
You may be paying for coverage you don’t need, mainly if your vehicle is on the older side. For example, if you have comprehensive coverage on a car that’s a beater, you may be paying more in premiums than you’d get back in a claim if the car got totaled.
For a vehicle that isn’t worth that much in the blue book anymore, consider dropping everything but liability.
Change your deductible To Save On Car Insurance
If you’re not already familiar, your deductible is what you pay before your insurance kicks in. Say you have a deductible of $500 and you get in an accident causing $1500 worth of damages. You’ll pay $500 and the insurance will pay the other $1000.
A low deductible has its advantages, particularly if you’re low on cash month-to-month. But a low deductible means higher premiums. If you can get together an emergency fund, consider cutting back your deductible to get lower monthly premiums.
Bundle your policies
Many insurers will offer you a better rate if you bundle your car insurance in with your home or life insurance. This can save you an average of about 15%, and it also cuts down on the paperwork you must do — especially if you had insurance policies with multiple companies.
Change your vehicle
It’s an unfortunate fact of life: more expensive cars cost more to insure. The newer they are, the more likely they will cost more to repair, because of high-tech replacement parts and sophisticated onboard systems.
If it’s feasible for you, consider trading in for an older vehicle that won’t cost as much to repair and (ideally) has a good safety and durability record.
Maintain your credit score
Having a higher credit score is desirable, and getting those numbers up is not always easy. But one side effect of keeping your credit score high is that your insurer will see you as more responsible and less of a financial risk, and your premiums may get lower.
Conversely, a major hit to your credit score could potentially mean a jump in your premiums.
Factors That Affect Car Insurance Cost
With things like age, driving record, credit score, and state all being mentioned as factors determining car insurance costs –we’ll want to add some structure. So, here is how exactly all these factors affect how much you pay for car insurance:
- Age – This isn’t exactly something you can’t help or use to budget out car insurance to your advantage since you can’t change when you were born. Car insurance companies worldwide use age as the primary factor of how much someone’s auto premiums will be. Age helps gauge driver experience, education, and total years behind the wheel. As a general rule of thumb, people between the ages of 16 to 25 are considered young drivers and subject to such premiums.
- State – Your state of residence, particularly zip code, is also a key factor in determining how much you pay for car insurance. Idaho currently has the cheapest car insurance rates at about $1,027 annually for full coverage. Louisiana is the highest at $2,986. So Louisiana is early double Idaho. Metropolitan areas typically have higher insurance rates than rural areas because of more traffic and crime rates.
- Driving record – Naturally, how safe of a driver you are plays a role in determining insurance costs. Car insurance companies are in contact with state DMVs, where they have access to your driving record. They look for any accidents and other major traffic convictions like DUIs. These drivers are seen as high-risk –able to get car insurance but have to pay more than usual. Inversely, car insurance companies reward good driving habits and clean records with lower premiums and even discounts.
- Credit score – While not every car insurance company looks at credit scores, they are still important to keep in good standing. Having car insurance is all about making your monthly payments on time, similar to a credit card.
- Car – The car’s make, model, and age you are insuring will affect the cost of car insurance. This may seem obvious since the insurer has to pay out if they are damaged. Cars that are more expensive to fix because of certain parts are more expensive to insure for obvious reasons. A rule of thumb when it comes to cars is that cars with more safety features tend to have lower premiums.
Greg is a Chartered Financial Analyst (CFA) with 22+ years experience in Financial Services. He has held numerous FINRA Securities licenses (series 7, 63, 65, and 66), and is an expert on Investment Products and Financial Planning. Greg has 22+ years experience as a real estate investor and degrees in Psychology and Philosophy.
Greg has been quoted/interviewed in Yahoo Money, Yahoo Finance, USA Today, Authority Magazine, Realtor.com, Business Insider, and others.
Greg is an avid runner, and the father to identical twin girls and their awesome brother. His love of budgeting and his kids led him to join The Great Resignation in 2021.
Disclaimer: Any Financial Tips on ChaChingQueen are general and informational. Speak with a professional about your specific situation.