How To Save On Car Insurance: 13 Ways To Lower Car Insurance Premiums

I have been with Shelter Insurance for a long time. I do not like them. I’ve had issues with their agents, and their rates are high. When we had rental houses, we were really limited in who we could get insurance from.

Now that we have scaled back our rental house business, it’s time to shop for insurance. I’ve researched how to save on car insurance. By following these tips, I just reduced our insurance by $600 annually. What is better is that we now have more appropriate coverage than before.

Navigating the complex world of car insurance can be a daunting task, I wrote this to help you significantly reduce your insurance costs without compromising on coverage.

This guide provides an all-encompassing look into how to save on car insurance, understand different coverage types, and select optimal coverage limits.

Understanding Car Insurance

Car insurance is a contract between you and the insurance company, designed to protect you against financial losses due to car-related incidents.

Coverage types range from liability, which covers damages to others in an accident you cause, to comprehensive coverage that insures against theft, vandalism, and natural disasters.

The cost of these policies varies based on several factors, including driving history, location, and the type of vehicle insured.

Related: How to Lower Car Insurance Premiums For Teens: Proven Recommendations

Balancing Cost with Adequate Coverage and Quality Service in Car Insurance

The lowest premium should not be the only consideration when shopping for car insurance. The real goal is to secure coverage that aligns with your risk profile while ensuring you pay a fair amount for that coverage.

It’s crucial to balance cost, adequate protection, and the quality of service, especially when filing a claim.

Aligning Coverage with Risk Profile

Your risk profile includes factors like your driving history, car value, regular routes, and how often you drive. The right coverage should adequately protect you based on these factors.

For instance, if you have a new, expensive car, opting for comprehensive and collision coverage makes sense.

Similarly, you might need higher coverage limits if you live in an area with high rates of accidents or car theft.

Paying a Fair Amount for Coverage

While the cheapest policy might be tempting, it may not always offer the protection you need.

It’s essential to compare insurance policies and premiums to ensure you are getting the best value for your money. This means looking at the coverage limits, deductibles, and any exclusions.

Sometimes, paying a bit more can get you significantly better coverage, which can be financially beneficial in the event of an accident or damage.

Quality of Service and Claims Process

The quality of service from your insurance provider, especially during the claims process, is critical. A lower premium might come at the cost of slower claims processing, less responsive customer service, or more challenges when you file a claim.

Research the insurer’s reputation for handling claims and customer support. Online reviews, customer testimonials, and ratings from independent agencies can provide insights into an insurer’s service quality.

How to Save on Car Insurance: 14 Ways To Lower Car Insurance Premiums

1) Shop Around for the Best Rates

One of the most effective ways to reduce your car insurance costs is by shopping around and comparing quotes from different insurance companies.

Compare the same coverage options across different companies to ensure you’re getting the best deal. Utilizing online comparison tools simplifies this process, allowing you to view quotes from multiple providers side by side.

2) Improve Your Credit Score

Your credit score plays a significant role in determining your insurance rates. Daniel A. DeLiberty, The Credit Lawyer, suggests that improving your credit score can lead to lower insurance rates.

By improving your credit score through regular bill payments and responsible credit management, you could see a reduction in your car insurance rates. On average, moving from a “poor” to a “good” credit rating can save you up to 20% on your car insurance premiums.

Related: 10 Reasons Why A Good Credit Score Will Save You Money

3) Prepaying Your Car Insurance

Opting to pay your car insurance premium in full for a longer period, like six months or a year, rather than monthly, can lead to savings.

Insurers often provide a discount for customers who choose to prepay because it guarantees customer retention for a longer period and reduces administrative costs associated with monthly payments.

The savings from prepaying your car insurance can vary depending on the insurer and your policy. However, on average, you could expect to save anywhere from 5% to 10% of your total premium cost.

For example, if your annual car insurance cost is $1,200, prepaying could save you between $60 to $120 annually.

4) Dropping Unnecessary Coverage and Add-Ons

Over time, certain coverages or add-ons on your car insurance policy might not be necessary anymore. For example, if you have an older car, comprehensive and collision coverage might not be cost-effective.

Similarly, add-ons like roadside assistance, rental car coverage, or higher than necessary medical payments coverage might not be essential based on your circumstances.

Types of Unnecessary Coverages to Consider Dropping:

1. Collision and Comprehensive Coverage on Older Cars: If your car’s value is low, these coverages might cost more than what you would receive in a claim payout.
2. Roadside Assistance: If you already have this service through another provider or auto club membership.
3. Rental Car Coverage: If you have a backup vehicle or rarely need a rental car.
4. Medical Payments Coverage: If you already have good health insurance coverage.

Dropping unnecessary coverage can lead to substantial savings. For instance, removing collision and comprehensive coverage on an older vehicle can save you hundreds of dollars per year.

The exact amount saved will depend on the specific coverages and your insurance rates, but it’s not uncommon to see annual savings in the range of $100 to $400 by eliminating coverages that no longer match your needs.

5) Adjust Your Coverage

Tailoring your insurance coverage to suit your specific needs can also lead to cost savings. Opting for a higher deductible, the amount you pay out of pocket in a claim, can lower your premium.

For instance, increasing your deductible from $500 to $1000 could reduce your collision and comprehensive coverage cost by 15-30%.

However, ensure you can comfortably afford the higher deductible in case of a claim.

6) Seek Out Discounts

Insurance companies offer various discounts that can substantially reduce your premium. These include safe driver discounts, multi-car discounts, and student discounts.

Claudia Torres, CEO of TheFab20s, mentions discounts for drivers who complete approved driver training programs, especially new drivers. Taking advantage of such discounts could shave off about 5% to 25% of your premium, depending on the insurer and the type of discount.

7) Bundle Insurance Policies

I know, Flo From Progressive is annoying. She is very annoying. But, bundling does make a difference.

Bundling car insurance with other insurance policies, such as homeowners’ or renters’ insurance, is another effective way to save. This strategy can lead to savings of up to 10% to 20% on your premiums.

Insurers often offer these discounts to retain more of your business.

8) When You Shop For Car Insurance Matters

When buying car insurance, timing can significantly impact the cost of your premiums. Understanding the best times to shop for new insurance and the potential savings can help you make more informed decisions.

Let’s explore these optimal times and the estimated savings.

Shopping at the End of the Year

Why It’s Beneficial: The end of the year is often a prime time for shopping for car insurance. This period aligns with when car dealerships are clearing out inventory, potentially leading to insurance discounts.

Estimated Savings: While specific savings can vary based on individual circumstances, shopping during this period can align with various discounts offered by insurers in conjunction with dealership promotions. The savings could be substantial, especially if bundled with new car purchases or other year-end deals.

Renewal Period Shopping

Why It’s Beneficial: Your insurance policy’s renewal period is an ideal time to reassess your coverage needs. Some insurers offer early-bird discounts to policyholders who start shopping 2-3 weeks before their policy expires.

Estimated Savings: Shopping during this window can lead to savings as insurers compete for your business. While the exact amount varies, customers have reported saving an average of 5-10% on their premiums by switching providers during this time.

Major Life Changes

Why It’s Beneficial: Significant life events like getting married, moving, or adding a teen driver can dramatically alter your insurance needs and rates. These are opportune times to shop for new insurance as your risk profile changes.

Estimated Savings: Depending on the life event, you could see a decrease in premiums. For instance, getting married can often lead to a multi-vehicle discount, potentially saving couples around 10-15% on their premiums. Similarly, moving to a less risky area or adding a more experienced driver can also lead to lower rates.

Continuous Shopping

Why It’s Beneficial: There’s no specific “best” time of year for car insurance shopping, but continuously comparing quotes before your policy expires or after major life changes ensures you always get the best deal.

Estimated Savings: Regularly shopping for car insurance can help you stay ahead of rate increases and save you money in the long run. Policyholders who routinely compare rates and switch providers when better deals are found can save an average of 10-20% annually.

Avoiding Last-Minute Shopping

Why It’s Beneficial: Waiting until your policy is about to expire to shop for new insurance can lead to higher rates due to perceived higher risk by insurers.

Estimated Savings: Avoiding last-minute shopping and potential coverage lapses can prevent rate increases of about 14%, as observed in some states. Proactively shopping for insurance can help maintain or even reduce your current rates.

Timing your car insurance purchase and shopping around during these optimal periods can lead to significant savings.

While the exact amount saved will vary based on individual circumstances, being mindful of these times can help you secure more favorable rates and coverage options.

9) Opt for Telematics

Telematics insurance, which uses a device in your car to monitor driving habits, offers a modern way to save. Safe driving habits tracked via telematics can lead to lower rates.

Telematics insurance adjusts premiums based on data like speed limits and braking patterns. This usage-based insurance can result in savings of up to 30% for particularly safe drivers.

10) Choose a Safe and Affordable Car

The type of car you drive significantly impacts your insurance rates. Cars with high safety ratings, lower theft rates, and a history of fewer accidents tend to have lower insurance costs.

For example, insuring a vehicle with a high safety rating can be up to 10% cheaper than insuring one with a lower rating.

11) Maintain a Clean Driving Record

A clean driving record is critical for keeping your insurance rates low. Each traffic violation or accident can increase your premium by an average of 20-25%.

Driving responsibly not only keeps you safe but also keeps your insurance costs down.

12) Review and Update Your Policy Regularly

Life changes, and so should your car insurance policy. Regularly reviewing and updating your policy to reflect your current situation can lead to savings.

For instance, updating your mileage information with your insurer could lower your rates if you’ve recently started working from home and are driving less.

13) 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.

Related: How To Get Discounts? Just Ask

Understanding Different Coverages and Recommended Limits

Liability Coverage

This mandatory coverage includes bodily injury and property damage liability.

• Recommended Limits: $100,000 per person/$300,000 per accident for bodily injury, and $100,000 for property damage.

Collision Coverage

Pays for damage to your vehicle in an accident.

• Recommended: Essential for newer or high-value vehicles, with a deductible range of $250 to $1,000.

Comprehensive Coverage

Covers non-collision-related damage.

• Recommended: Crucial for newer or valuable cars, similar deductible to collision coverage.

Uninsured/Underinsured Motorist Coverage

Protects against drivers without sufficient insurance.

• Recommended Limits: Match your liability coverage.

Personal Injury Protection (PIP)

Covers medical expenses regardless of fault.

• Recommended: Opt for the minimum required or as a supplement to health insurance.

Medical Payments Coverage

Similar to PIP, it covers medical expenses.

• Recommended: Useful as a supplement or where PIP is not available.

Gap Insurance

Covers the difference if your car is totaled and you owe more than its value.

• Recommended: Consider if you lease or finance your car.

Actionable Summary: Key Steps to Save on Car Insurance

1. Compare Insurance Quotes: Regularly compare quotes to ensure the best rates.
2. Improve Your Credit Score: A higher score leads to lower premiums.
3. Adjust Your Deductibles: Higher deductibles can lower your premiums.
4. Seek Out Discounts: Ask for available discounts like safe driver or multi-car.
5. Bundle Insurance Policies: Combine policies for discounts.
6. Opt for Telematics Programs: Enroll in usage-based programs for potential savings.
7. Choose a Safe and Affordable Car: High safety ratings lead to lower rates.
8. Maintain a Clean Driving Record: A clean record keeps rates low.
9. Review and Update Your Policy Regularly: Adjust coverage according to life changes.

Guide to the Best Low-Cost Car Insurance Companies

Selecting the right car insurance involves balancing cost, coverage, and service quality.

So when shopping for car insurance, who is the best? Here’s an overview of some cost-effective car insurance companies tailored for different driver profiles:

State Farm

• Best For: A wide range of drivers, including those prioritizing a balance between affordability and reliable service.
• Benefits: Offers competitive rates, especially for drivers with a clean record, along with strong customer service and a variety of discount programs.

Geico

• Best For: Drivers with high credit scores looking for affordable rates.
• Benefits: Known for offering lower premiums to drivers with good credit, Geico also provides a range of coverage options and discount opportunities.

USAA

• Best For: Military personnel, veterans, and their families.
• Benefits: Renowned for offering some of the lowest rates in the industry along with exceptional customer service. However, it’s worth noting that USAA’s services are exclusive to those with military affiliations.

American National

• Best For: Budget-conscious drivers looking for basic coverage.
• Benefits: Offers lower-than-average rates and is a good choice for drivers who prioritize cost savings over extensive coverage options.

Farm Bureau

• Best For: Those seeking affordable liability-only coverage.
• Benefits: Known for its low rates for minimum coverage policies and good customer service, making it an attractive option for drivers who need basic insurance.

American Family (AmFam)

• Best For: Drivers eligible for multiple discounts.
• Benefits: Offers a variety of discounts that could make it a more affordable option than competitors, especially for families, students, and safe drivers.

Travelers

• Best For: Drivers looking for a personalized policy with various coverage options.
• Benefits: Offers a comprehensive range of coverage choices, including telematics-based discounts for safe driving, although its telematics program may not be as forgiving as some others.

Each of these companies caters to different needs and preferences. When choosing an insurance provider, consider factors beyond just the premium cost, such as the specific coverage options, discount programs, customer service reputation, and eligibility criteria.

Balancing Cost with Adequate Coverage and Quality Service in Car Insurance

The lowest premium should not be the only consideration when shopping for car insurance. The real goal is to secure coverage that aligns with your risk profile while ensuring you pay a fair amount for that coverage.

It’s crucial to balance cost, adequate protection, and the quality of service, especially when filing a claim.

Aligning Coverage with Risk Profile

Your risk profile includes factors like your driving history, car value, regular routes, and how often you drive. The right coverage should adequately protect you based on these factors.

For instance, if you have a new, expensive car, opting for comprehensive and collision coverage makes sense.

Similarly, you might need higher coverage limits if you live in an area with high rates of accidents or car theft.

Paying a Fair Amount for Coverage

While the cheapest policy might be tempting, it may not always offer the protection you need. It’s essential to compare insurance policies and premiums to ensure you are getting the best value for your money.

This means looking at the coverage limits, deductibles, and any exclusions.

Sometimes, paying a bit more can get you significantly better coverage, which can be financially beneficial in the event of an accident or damage.

Quality of Service and Claims Process

The quality of service from your insurance provider, especially during the claims process, is critical.

A lower premium might come at the cost of slower claims processing, less responsive customer service, or more challenges when you file a claim.

Research the insurer’s reputation for handling claims and customer support. Online reviews, customer testimonials, and ratings from independent agencies can provide insights into an insurer’s service quality.

Conclusion: How to Save on Auto Insurance

The optimal car insurance policy provides a balance between a reasonable premium, adequate coverage based on your individual needs, and reliable customer service, particularly during the claims process.

It’s about getting the best value for your money while ensuring you and your assets are well-protected.

Remember, the cheapest option isn’t always the best choice, especially regarding something as crucial as car insurance.

By implementing these strategies, you can ensure that you’re saving money and securing the right level of protection for your needs.

Regularly reviewing and adjusting your insurance needs is essential in maintaining the right balance between protection and cost.

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