10 Tips to Lower Your Auto Insurance Costs – Forbes Advisor
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No one wants to pay too much for the necessities of life like gas, rent, and cell phone service. The same goes for car insurance. And just as you can search for deals on other purchases, you can search for ways to lower your car insurance costs.
Since the average good driver in the United States pays $1,556 a year for car insurance, reducing your insurance bill by just 5% to 10% can put more money in your pocket. In some cases, you could reduce your car insurance costs by 30% or more. Here are 10 tips to help you lower your auto insurance premium.
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Many of us shop for great deals on electronics, clothing, and other everyday purchases. You can apply the same strategy to auto insurance.
Whether you’re getting insured for the first time, renewing your coverage, or switching to another insurer, don’t overlook the savings you can make by comparing rates from multiple car insurance companies.
Car insurance rates for the same coverage can vary greatly from one insurance company to another. Therefore, if you don’t shop around, you won’t know how much you can potentially save. The industry-backed Insurance Information Institute suggests getting quotes from at least three insurers to compare car insurance costs and coverage.
Be sure to compare identical policy coverage and limits, so this is an apples to apples price comparison
2. Review your deductibles
USAA spokesperson Rebekah Nelson recommends reviewing the deductibles attached to your current coverage to see if you can increase them.
“If you haven’t done this in a while, you may find that a higher deductible is more appropriate and will lower your rate,” Nelson says.
An auto insurance deductible is the amount deducted from your insurance check when you file an all risk or collision insurance claim. You choose your deductible amount when you take out a policy and you can adjust your deductible later if you change your mind. A higher deductible means you pay a lower premium. This is because you bear more of the costs if you file a claim, and you are less likely to make claims for minor damages, since repair costs won’t greatly exceed your deductible amount.
According to the Insurance Information Institute, increasing your deductible from $200 to $500 could reduce the cost of your collision and comprehensive coverage by 15% to 30%. Raising the deductible even higher, to $1,000, could result in savings of 40% or more.
The institute also points out that if you increase your deductible, you should set aside enough money in case you end up filing a car insurance claim. For example, suppose your compensation for an accident is $5,000 and your deductible is $1,000. Your insurance company will pay $4,000, so you are responsible for $1,000 of out-of-pocket costs to repair damage to your vehicle.
3. Bundle insurance policies
You will often see television commercials promoting the possibility of bundling auto and home insurance. Most insurance companies offer discounts to policyholders who purchase both home and auto policies, and bundling may apply to other coverage such as motorcycle and boat insurance.
Typically, a bundled discount (also known as a multi-policy discount) can generate savings of 5% to 25%.
Not only can you get a discount through bundling, but buying more than two policies from one company also “simplifies your insurance because you have it with one insurer,” Nelson points out.
4. Explore auto insurance discounts
Car insurance companies offer a multitude of discounts in addition to bundled discounts. Some of the more common discounts include:
- Multi-car discount. Insuring more than one vehicle with the same insurer can generate savings of 8 to 25%.
- Discount on vehicle safety. If your car is equipped with the latest safety features, such as anti-lock brakes and airbags, you could qualify for a discount.
- Discount on new cars. Do you drive a car less than three years old? If so, you could qualify for a 10% to 15% discount.
- Good driver discount. If you go a certain amount of time without an accident or a traffic violation, your car insurer could reward you with a discount ranging from 10% to 40%.
- Good student discount. Good grades can pay off. Some insurers give discounts ranging from 8% to 25% to a full-time high school or college student between the ages of 16 and 25 earning at least a B average.
5. Let your insurer track your driving
A number of auto insurers allow you to potentially lower your bill by purchasing usage-based auto insurance. These programs use an app or device that plugs into your car to track your driving behavior. Factors tracked can include the number of miles traveled, speed, and how often you brake.
If the data shows you’re a good driver, you can qualify for a discount. For example, if a customer joins USAA’s SafePilot program, they can receive a discount of up to 30%. Other examples of usage-based auto insurance include Snapshot from Progressive, Drive Safe & Save from State Farm, and Drivewise from Allstate.
Be aware that in some cases, usage-based insurance could increase your rates, according to a 2022 “Insurance Trends and Outlook” report from TransUnion. Usage-based auto insurance is ideal for low-mileage drivers who don’t drive at night and have very safe driving habits.
6. Take a defensive driving course
Completing a defensive driving course approved by your insurer can save money on your car insurance. For example, a driver in Texas who graduates from a Geico-approved online defensive driving course can receive a discount of up to 10% for three years. In New York, you can reduce your rate by 10% for three years by successfully completing an approved traffic safety course.
7. Park in the garage
Some insurers will reduce your auto insurance if you park your car in your home’s garage rather than in your driveway or on a street. Data shows that cars parked in garages are less likely to be stolen or damaged in an accident.
8. Drive a safe car with low repair costs
When visiting a car dealership in person or online, consider the type of car you are going to buy. Some cars are cheaper to insure than others.
In addition to your age, driving record and other variables, auto insurance companies consider the type of vehicle you drive when pricing your coverage. They look at how likely a certain car is to be stolen, how much it typically costs to repair that type of car, how safe it is, and the amount of claims made for similar models.
the Insurance Institute for Road Safety has safety ratings for thousands of vehicle models and also shows the percentage above or below the average number of claims filed for particular vehicle classes. the National Crime Insurance Bureau lists the most stolen cars each year.
Related: See the Forbes Advisor ranking of the most and least expensive cars to insure.
9. Boost your credit if possible
Most states leave credit-based insurance scores to insurers to help determine your auto insurance rates. This score predicts the likelihood of you making a car insurance claim. The lower your credit rating, the higher the chances of filing a costly claim. If you can increase your traditional credit score, it could also increase your credit-based insurance score, paving the way for better car insurance rates.
A Forbes Advisor analysis of rates showed that drivers with bad credit pay an average of 76% more than those with good credit.
10. Pay your premium in full if possible
Instead of spreading out premium payments by paying monthly, consider paying your premium in one installment. Many auto insurers will give you a small discount for doing so. Progressive, Allstate, American Family and Farmers are some of the major insurance companies offering this discount.