How to Reduce the Cost of Car Insurance
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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...
UPDATED: Oct 24, 2022
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- There are many different options to reduce the cost of car insurance
- Keeping a clean driving record, asking for discounts, and keeping your policy current will help your insurance premium
- It is possible to negotiate a better price for car insurance with some companies
Can you negotiate car insurance rates? Can you haggle with car insurance companies, or are you stuck paying the first price they give you?
There are several ways to reduce the cost of car insurance. Discounts, safe driving, and keeping current with your car insurance policies allow you to question your car insurance rates. Keep reading to learn how to reduce the cost of car insurance.
Paying less for auto insurance isn’t as difficult as you might think. While some of the initial steps might require a bit of legwork on your part, others might be as simple as making a quick phone call to your insurer to let them know your auto insurance needs have changed.
You need to be aware of the factors that affect the price of car insurance, like coverage level, driving history, and credit rating, just to name a few. Some factors you can improve but others like your age you can’t change.
You can also use this guide to learn how to reduce the cost of car insurance and how to negotiate car insurance rates. The best way to get an affordable cost for car insurance is to compare car insurance quotes. Just enter your ZIP code in our free tool to find the best rates for you.
How To Find Savings on Car Insurance
What are things that you can do to reduce your insurance rate? Read on for our main steps of reducing your car insurance cost. We explore the top ways you can cut your auto insurance costs, including trimming extra coverage you don’t need, comparing rates among different insurers, paying upfront, taking advantage of discounts, and much more.
Reduce Car Insurance Coverages
How much car insurance do I need? Drivers who are still paying a car loan are subject to the minimum standards set by the bank that issued the loan. Check both requirements to determine the bare minimum needed for your car.
For starters, you need to know what the minimum requirements are in your state. Nearly every state requires drivers to maintain a minimum amount of liability insurance by law if they cause a wreck that injures another person or damages another person’s property.
Also, drivers who are still paying a car loan are subject to the minimum standards set by the bank that issued the loan. Check both requirements to determine the bare minimum needed for your car.
You’ll also need to consider your vehicle’s worth when thinking about whether you need collision coverage or comprehensive coverage.
So if you are asking, “Should I have full coverage on a 15-year-old car,” the answer is usually no. If your car isn’t worth much, it may not make sense to have full coverage. It might be smarter to just purchase basic liability insurance that covers damages or injuries you cause in a wreck.
You may also want to opt for Personal Injury Protection to cover your injuries if you get in a wreck. You may already have health insurance that will cover you, so be sure to check before buying extra coverage.
Aside from dropping coverage that doesn’t make financial sense, you can also save money by dropping optional coverages, such as roadside assistance, full-glass replacement, or rental car use.
While these are certainly helpful, you can put money in savings to cover situations like this rather than adding them to your insurance bill.
Once you’ve determined how much coverage you want, you can look to save money and reduce the cost of coverage by comparing car insurance rates. If you’re still uncertain about which coverage options are best for you, check out the article “The Different Types of Car Insurance Coverage” for more information.
Tip: If you already have health and disability insurance coverage through your work, you can probably go without Personal Injury Protection (PIP) coverage on your car insurance.
If you live in a state where PIP is required by law, you can opt for the minimum. The idea is to avoid doubling up coverage where you can.
Compare Car Insurance Rates
Auto insurance is a competitive industry, and each insurer sets its rates slightly differently based on different factors. A fast way to get multiple quotes from several major insurers is to use our online quote tool.
After you’ve gathered a handful of quotes, you may find that certain companies will match their competitors’ rates to earn your business. Some will even match or beat the price that was quoted to you by another insurance company.
To get an idea of which insurers offer coverage in your state, look on your state insurance department’s website. Many of these sites maintain a list of the top insurers by the number of policies in that state and provide a helpful list of contact information all in one place.
When you compare rates, remember to compare quotes for identical levels of coverage. This way, you are making “apples to apples” comparisons.
In other words, you must know ahead of time what policy limits you need for each type of coverage and the deductible you can afford.
Let’s look at the average car insurance rates by coverage type per year from some of the biggest auto insurance companies, such as USAA auto insurance. Compare the rates for low or liability only coverage and high or full coverage.
|Average Annual Rates for Low Coverage
|Average Annual Rates for Medium Coverage
|Average Annual Rates for High Coverage
Additionally, the national average cost is $1,592 per year, i.e average car insurance premiums of $133 per month.
The monthly cost to go from low to high auto insurance coverages is around $30 extra. The extra upfront cost could save you down the line if you are in an accident or your car gets damaged.
Have the insurance provider factor in any discounts you are eligible for so that the final quote is as accurate as possible.
Remember that price isn’t the only thing to take into consideration when choosing a car insurer. The level of service you receive is also important.
Before making your final decision, call around to a few local body shops and ask which insurers they recommend.
Since most body shops deal primarily with insurance claims, they typically experience both the good and the bad from the whole insurance industry and will hopefully be forthcoming with advice on which insurers are the easiest to work with.
J.D. Power rates companies based on many criteria, including customer service. Their ratings are a great place to start if you are unsure if a company has the service you are looking for.
If you are unfamiliar with an insurer, you can also ask your state’s department of insurance if any complaints have been filed against them. It’s not worth your while to save a little money on insurance only to receive poor service.
Tip: You may be able to save time by purchasing insurance through an independent insurance agent since they sell policies from a variety of different companies and can do cost comparisons for you.
This is a particularly good idea if your driving history isn’t quite as spotless as you’d like because it can be much more difficult to find an affordable auto insurance policy on your own.
Negotiate a Better Car Insurance Rate
Can you haggle car insurance prices if you feel your rates are too high? Can you haggle insurance prices if you have bad credit? Negotiating car insurance rates doesn’t have to be difficult.
If you feel your rates are too high or keep increasing, call a local agent or customer service representative and ask how to negotiate auto insurance rates with that auto insurer. Ask about any negative factors that could be contributing to your rates, such as your credit or driving history.
Where your credit history is concerned, there’s always the possibility that an error on your credit report or stolen identity is contributing to higher rates.
A brief chat with your agent can shine a light on problem areas you may be able to remedy or available discounts you aren’t taking advantage of.
Additionally, your rates may be up for review if you’ve moved into a new neighborhood, gotten a new job, graduated from school, gotten married, or bought a house, among other factors.
Insurers look at multiple demographic factors to assess your risk of an accident, so if you’ve changed your lifestyle in any way, check with your insurer to see if it has affected your rates for the better.
If your driving history and credit are both pristine and you’re utilizing all available discounts, you still have room to negotiate your insurance rates.
Explain to your agent that you are unhappy with your current rate and that you may take your business to a different insurer that can offer a better value. If you are a longtime customer, you may have even more leverage.
It’s also useful to come to these conversations armed with quotes from other insurance companies.
If you can prove that other insurance companies will offer you the same or better rates, your current insurance company may fight to keep your business by matching or even beating the quotes. You may need to send your insurer a copy of the competing quote, however.
Tip: An agent or representative may not initially give in to your request for lower rates, but persistence can pay off. Call back in a month or two and talk to a different representative about negotiating insurance rates, or ask to speak to their supervisor.
Just remember to be civil and treat them respectfully on the phone. Agents and representatives will be less inclined to help you if you lose your temper or come across as overbearing.
Take Advantage of Car Insurance Discounts
How can I get discounts on car insurance? Insurance companies offer a wide variety of discounts that you should take full advantage of. Some of these discounts include:
- Discounts for Car Safety Features – If you drive a car equipped with air bags, anti-lock brakes, daytime running lights, or a theft prevention device, you could save big on insurance. Airbags and theft prevention devices typically lead to the deepest discounts, as they reduce the cost of medical payments coverage, PIP coverage, and comprehensive coverages, respectively. Some insurers offer discounts if you equip your car with a dashboard-mounted camera. Certain insurers will even provide the camera and set it up to record when driving, thus making their claims process easier and saving you the hassle of recounting events if an accident should occur.
- Good Driver Discounts and Claims-Free Discounts – Almost all major insurers offer significant discounts to good drivers who haven’t had an at-fault accident on their record or filed a claim for three to five years. This is a huge incentive to drive defensively and avoid risky behavior on the road. Your driving habits matter!
- Driver Education or Safe Driving Course Discounts – Most insurers will offer a discount to policyholders who take an approved safe driving course. While you might associate defensive driving courses with getting traffic tickets dismissed, doing this independently can lead to a discount. A driver education course is particularly beneficial for teenage drivers, who cost the most out of any age group to insure. Parents can soften the blow of teen auto insurance costs by having their teen take a driver education course.
- Good Student Discounts – Teens are notoriously expensive to insure because they’re inexperienced drivers. If you’re wondering how to reduce car insurance costs for young drivers, there are ways. Full-time students who earn good grades (a “B” average or higher), either in high school or in college, will receive a discount if they send in proof of those grades to their insurer. Auto insurers have determined that good students are more responsible and pose less risk of making claims.
- Military or “Preferred Occupation” Discounts – Many insurers provide a discount to veterans or members of the armed forces to honor them for their service. Insurers may also provide discounts to people who work in certain occupations, such as police officers, firefighters, or teachers.
- Affiliate Discounts – If you belong to a group that is partnered or affiliated with your car insurer, you may receive a discount. These insurance partners could include certain credit unions, alumni associations, professional development associations, fraternities/sororities, and more.
- Multi-car Discounts or Multi-Policy Discounts – Insurers like to reward you for trusting them to insure you in as many ways as possible. If you insure multiple cars or hold multiple policies with the same insurer (such as home/renters insurance and auto insurance or life insurance), you can save money by “bundling” them together.
- Mature Driver Discounts – Senior citizens may be eligible for a discount if they take a state-approved course for mature drivers.
- Low Mileage Discounts – Drivers who spend less time on the road and drive fewer miles than average can take advantage of lower rates and low mileage discounts because less time spent on the road means less risk of a traffic incident or moving violation. Typically you’ll need to drive less than 10,000 miles per year (some companies require an annual mileage limit of 6,000 miles or less) to qualify. If moving closer to work isn’t an option to reduce your time spent on the road, making use of available public transportation may be another option to help you qualify for a low mileage discount.
- Usage-Based Insurance Discount – Some insurance carriers offer usage-based programs in which you can receive a discount for installing an app on your phone that will evaluate your driving habits. For example, American Family Insurance offers the “KnowYourDrive” program, and Geico Insurance Agency offers the “DriveEasy” program. The name varies from company to company, but the programs are essentially the same.
Insurance discounts are a great tool to teach you how to negotiate with auto insurance companies. Many times not only will they give you a discount if you ask, but they will also allow you to bundle discounts for even greater savings. When you sign up for an auto policy, make sure to ask if there are any additional discounts you might be entitled to.
Drive Safely to Reduce Rates
Can you negotiate car insurance rates if you have a poor driving history? Sadly, you probably won’t get a break if you have multiple accidents or tickets because you are just not a good bet, making it harder to know how to lower your car insurance after a ticket or accident.
Out of the factors that affect auto insurance rates, perhaps the biggest factor affecting the cost of insurance is your driving history. Car insurers aren’t fond of losing money, and they know their chances of paying a claim are higher when they insure people with a history of at-fault accidents and tickets.
Because of the risk insurers take on by covering people with bad driving history, they may tack a surcharge onto your policy if you have one or more traffic violations or accidents. Therefore, one of your best defenses against high car insurance prices is driving safely.
When it comes to assessing rates and costs, each insurer uses its formula to determine an appropriate surcharge to give someone who has a traffic infraction on their record.
An otherwise good driver who is ticketed once for a minor speeding infraction may not see their rates raised at all, while the second violation of this nature will typically lead to a rate increase. In general, these types of violations will stay on your record for three years, though this varies by state.
However, if you are ticketed for a major violation, such as reckless driving or a DUI, you can expect a significant rate increase when it comes time to renew your policy.
Too many major violations may even lead your insurer to cancel your policy or choose not to renew when the term is up. Major violations can impact your car insurance rate for up to five years, depending on the insurer and the state.
Tip: If you are generally a safe driver, look for insurers that offer accident forgiveness, a perk in which the insurer agrees not to raise your rates after a single accident.
On the other hand, many insurers offer discounts for drivers who maintain accident-free records for certain lengths of time. If you have a good driving history, ask your insurer about any discounts they offer for your clean driving history.
Pay for Car Insurance Upfront
Car insurers like to reward policyholders who pay upfront and in full with deep discounts. While breaking down your auto insurance rates into more manageable monthly payments might initially seem easier on the wallet, it usually costs you significantly more to do this over the term of your policy.
Instead of paying your insurance monthly, pay the entirety of your rate up-front on an annual or six-month basis.
Tip: Since the average person doesn’t have stacks of cash on hand to pay their insurance rates upfront, it’s a good idea to break down the lump sum into monthly amounts and put a little money away each month leading up to the end of your current term.
That way, you will be ready to pay in full when you receive your renewal notice.
Raise Your Car Insurance Deductible
One of the quickest tips for reducing the price of car insurance is to raise your deductible, which is the amount you must pay out-of-pocket before insurance starts paying a claim.
Most drivers choose low deductibles such as $250 or $500, which are easy to pay out-of-pocket but contribute to higher rates.
As an alternative, many insurers offer deductibles of $1,000, or even as high as $3,000. If you choose a higher deductible, it forces you to be responsible for any damage less than your deductible amount, thus lowering your risk of a claim and reducing your rates.
Ask your insurer to provide you with auto insurance quotes for the same policy limits, factoring in different deductible amounts, and consider how much you could reasonably afford to pay out if you got in a wreck.
Use caution in doing this, though. If you raise your deductible but can’t afford to pay that much to repair your vehicle if it sustains major damage, you could find yourself in a serious financial bind.
Tip: If you want to raise your deductible to save money, but are fearful that you’ll get stuck paying a huge bill if you get in a wreck, consider saving up the full amount of your deductible before you make this change.
This way, you’ll have your own financial cushion in place, and you won’t be paying more than you need to for auto insurance.
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Move Ways to Save on Car Insurance
If you still have questions about how to save on car insurance, we have answered some of the most commonly asked questions below. Read on to see what others are asking about how to lower auto insurance premiums.
Does the car you drive affect your insurance rates?
The short answer is yes, the vehicle you drive can affect your insurance rates. Larger, newer, and more expensive vehicles will typically be more expensive to insure than smaller, older, and less valuable vehicles. Why? Because the larger, newer, and/or more expensive your vehicle, the more it will cost your insurance company in the event of filing a claim for repairs.
If you’re planning to purchase a new vehicle and are hoping to keep your insurance rates low, you’ll need to consider which kinds of vehicles will have the least effect on your rates. One way to do this is to compare rates for the different vehicles you’re considering purchasing to see, resulting in the most affordable car insurance coverage, all else being equal.
You should also consider if it is a good time to purchase a new car, as paying high prices for cars can leave you without enough money for insurance. If you see that car prices are abnormally high, such as cars being worth more used than new, it is better to hold off on your purchase.
What happens if you let your policy lapse?
When money is tight, it can be tempting to drop your insurance policy. But you should never allow your car insurance coverage to lapse.
This is a surefire way to increase your rates dramatically the next time you purchase auto insurance (if you intend to keep driving, you will need to purchase it again). And that’s not the only thing you’ll have to worry about.
If you let your insurance lapse, you are no longer meeting your state’s minimum liability requirements and are driving illegally. If you get caught driving without insurance, you could be ticketed and issued a steep fine.
Do it a second time, and you could be issued an even higher fine, have your vehicle impounded, or even have your driver’s license suspended.
This is a slippery slope. The further you go along these lines (e.g., driving on a suspended license, continuing to drive without insurance), the worse your driving record will get, which typically makes it impossible to get insurance in the standard market.
You could be forced into a high-risk insurance market, which not only costs more but offers fewer types of coverage.
Tip: If you are struggling financially, consider downgrading to the state minimum liability insurance.
While it’s risky to drive without other types of coverage, you’ll at least be driving legally and avoiding tickets, fines, and higher future rates associated with letting your insurance lapse. You might also consider downgrading your vehicle to one that is cheaper to insure.
If you’re paying too much for car insurance, it’s good to know you have options that can help you pay less. Remember that insurance is a competitive industry, and you’re not obligated to stick with a particular insurer that you feel is overcharging you.
At the same time, now that you know how to negotiate lower auto insurance, loyalty could also work to your advantage.
How does your credit score affect your car insurance rates?
We mentioned credit earlier as a factor in how your auto insurance rates are adjusted. But does credit score really matter? Look at this table to see how poor, fair, and good credit can affect insurance rates.
|Average Annual Rates for a Good Credit Score
|Average Annual Rates for a Fair Credit Score
|Average Annual Rates for a Poor Credit Score
The average annual rate for drivers with good credit (anything 670 or above) is $3,166. However, if you have a fair credit score (typically 580-669), you’ll see an average rate increase of 17 percent, and a poor credit score (anything below 580) means an additional average increase in rates of 67 percent.
While these averages may not reflect exactly what you’ll pay, it’s a good reminder that credit can have a significant effect on your rates, so it pays to improve your credit score as much as you can if you don’t already have good credit.
Are there other ways to save on car insurance?
In addition to everything we’ve discussed in this guide, there are still other ways to save. One example is to ask about group insurance. This option may not be available to everyone. However, some drivers may be able to save by obtaining coverage through their employer or membership with a particular group (similar to affiliate discounts).
Another option for saving on your rates is pay-as-you-go insurance. Pay-as-you-go insurance is usage-based coverage in which your rates are based on your personal driving data. Typically, you’ll need to install a telematics device on your vehicle (provided by the insurance company) or install an app on your phone, which tracks your driving. This may be a good option if you habitually drive safely and typically average fewer than 10,000 miles per year on the road.
Your car insurance rates may also go down as you age. At what age does auto insurance go down? Usually, once drivers hit age 25 or older, their rates will begin to decrease, especially if they have a clean driving record.
Ready to buy low car insurance and save money? Now that you know how to reduce the cost of your car insurance start shopping around for a car insurance policy with affordable rates. Enter your ZIP code to compare quotes and negotiate a better price for car insurance today.