How to lower car insurance costs without losing coverage
Fact-checked with HomeInsurance.com
Car insurance can add up quickly for a variety of reasons. AAA’s 2019 “Your Driving Costs” study revealed that drivers paid a median cost of $1,251 per year on car insurance. Knowing how to lower car insurance premiums can help you turn savings into an opportunity to invest in other financial ways.
In this article, you can learn how to get cheap car insurance (or save money on your existing policy).
7 Fast Ways to Cut Auto Insurance Costs
Ready to get started? Here are some simple and effective steps you can take to lower your current car insurance premiums or learn how to get cheap car insurance.
1. Focus on paying off your car loan.
If you financed your vehicle, you’re required to have a higher level of coverage. Finding ways to pay off your car loan could give you more flexibility on what type of coverage you can opt for. Once your loan is paid off, you could lower or drop extras, such as collision or comprehensive coverage, gap insurance and loss of use or rental coverage.
However, think carefully before you go with minimums on coverage, especially on a newer or higher-value vehicle. Dropping gap insurance or loss of use may be sensible. But collision coverage, which pays for loss or damage to your vehicle, may be worth keeping. If you’re in an accident with minimal coverage, you’ll have to pay out of pocket for repairs or your loss.
2. Lower your coverage limits.
States have a minimum requirement of car insurance, which could vary in cost and coverage. It’s wise to increase your coverage, especially if you drive a newer vehicle or you have assets, such as a home you’d like to protect from an expensive lawsuit. There’s a fine line between not enough coverage and too much, so revisit your coverage amounts to determine where savings are possible.
If you have private health insurance coverage, consider knocking down your medical payments and PIP limits, or removing them so that you can drop the costs. You can always add them back in later if things change.
3. Look for changes.
You’d be surprised to learn how many people are paying for household drivers that haven’t lived in the house for years. Or in some cases, household members such as teens and young adults may have aged out of more expensive coverage and now qualify for cheaper car insurance.
Look over your auto insurance policy and be sure everything is accurate. If you have lost your job, switch the usage on your car to pleasure use, which may give you cheap auto insurance premiums. Update your insurer about any changes which could work in your favor, such as parking your car in a workplace or home garage, changes to the number of miles you drive per year or adding a vehicle alarm.
4. Raise your deductible.
If you’re a consistently safe driver, you’ll likely never need to file an insurance claim — or pay a deductible. If you’re not familiar with the deductible, it’s the amount you pay out of pocket before your insurer pays the rest of the claim. Most policies have a deductible of roughly $500. Bumping that up to $1,000 or more could save you money on your monthly premiums.
Insurance and financial expert Laura Adams suggests you “increase your deductibles on collision and comprehensive coverages. The higher your deductibles, the lower your premium.” Don’t get carried away with raising it and end up unable to afford the higher lump payment. Adams recommends, “Make sure you have enough savings to cover a higher deductible if you need to make a claim.”
5. Bundle your insurance policies.
Adams highly recommends having all your policies with one insurance company. She shares: “One of my favorite ways for drivers to lower car insurance costs without losing coverage is “bundling.” This simple strategy requires you to purchase multiple types of policies, such as auto and homeowners or renters from the same carrier. Insurers want more of your business, and they reward you for having multiple lines of coverage — or even having more than one car on a policy.”
Check out what the top insurers will offer you when you opt for multi-line discounts or bundling. You could get as much as 30% on one or several of your policies with the insurer.
6. Check for discounts.
Besides the bundling discount, there are a number of other ways to save on your car insurance. Best of all, you could qualify for multiple discounts.
Ask your current insurer about affinity discounts — a number of people are unaware they’re eligible for a car insurance discount between 3% and 7% just because they belong to a certain club, are an employee at an affiliated company, or are alumni from a particular college. Each insurer has a different list of eligible organizations or employers, so you’ll need to ask the insurer about it, because odds are, they won’t bring it up if you don’t.
Other discounts you may qualify for include:
- Driver safety course certification
- Vehicles with enhanced safety equipment
- Hybrid or electric vehicles
- Good student
- Accident-free history
- Military members
7. Shop around.
The most effective way to lower car insurance is to comparison shop. You may find that your current insurance company is unable to provide you with the cheapest insurance on the market. Comparing companies once a year is a great way to find additional savings.
Make sure you’re comparing providers by similar policy parameters. Read the fine print on the quotes to make sure the limits, hazards covered and deductible amounts are the same. If you find that switching car insurance could save you considerable money, do a little research about the company before you take action. Look for customer reviews to learn more about how others feel about the insurer. A couple of good places to start are J.D. Power’s Auto Insurance Customer Satisfaction Study and the Better Business Bureau.
If you’re particularly attached to your current insurance company, you could leverage what you discovered to your advantage. Contact your current insurer with a copy of the cheaper car insurance quote. Let them know you’re happy with their service but you’re considering switching to save money. Your current insurance company may offer to match the cheaper car quote (or provide you with a bigger discount) to keep your business.
Other considerations and ways on how to lower car insurance
The quick fixes to drop your car insurance now are effective but a long-term strategy is necessary for insurance savings over time. Consider taking a defensive driving course — doing so could save you money on your insurance for up to three years. Besides, the better you get at driving and avoiding accidents, the less likely you’ll need to file a claim (which can drive up rates).
Besides the driving course, work on your credit score. Many insurers take your credit score into account when pricing your car insurance. Some ways to improve your credit include paying down debts and using your credit cards wisely while paying your balance due each month on time. Monitor your credit score and once it improves, let your insurance company know and ask them to reevaluate your insurance premiums.
Finally, if your car insurance premiums are a struggle each month, consider downsizing your car. A more sensible hatchback or compact vehicle may not be as exciting as an all-wheel-drive SUV or a sports car, but you’re likely paying an upcharge on your auto insurance for the luxury.
For those who are not happy with their current insurance rate, there are plenty of savings options available.
- Look for quick ways to lower your premiums by reducing your insurance coverages and raising your deductible.
- Focus on long-term strategies including becoming a better, more defensive driver with better credit.
- Shop around at least once per year to compare what other insurers are charging for car insurance. You may decide it’s time to switch or go back to your car insurance company to renegotiate a better deal.
One note of caution is that you should never view auto insurance as optional. You will end up in a worse situation if you cancel your insurance unless you are planning to sell your car and walk for a year or two.
Compare car insurance quotes and find better ways to get cheap auto insurance premiums without leaving yourself exposed to major violations or lawsuits. Focus on trimming where beneficial now and when it makes financial sense later, make additional changes.