With inflation on the rise, we’re all trying to save money where we can, and our car insurance premium is no exception. So many variables go into how your car insurance price is calculated, making it challenging to know where to start while ensuring you are still protected from unexpected events. But we have you covered. As an insurance industry veteran with over 15 years of experience, I have the inside scoop on what companies use to base your rates. Here are the top ways to lower your car insurance without sacrificing your needed coverage.
Factors That Affect Your Car Insurance Rate
While some auto insurance companies may place more emphasis on certain aspects, almost all carriers look at the same information to determine how much you’ll pay. Examples of these variables include the following:
- How long you have been driving
- The type of car you drive
- Your driving record and prior claims history
- A credit-based insurance score
- Where you live
- Your prior insurance history
- How much you drive
- Your marital status
- The coverage you carry on your car
- Any applicable discounts
Some companies have started to adopt telematics or usage-based programs in their pricing. This means they use your driving data, either through an app on your phone or a plug-in device in your car, to determine how much you’ll pay. Some factors for telematics or usage-based insurance include speeding, hard braking or cornering, how often you drive at night, and how much you drive.
5 Best Ways to Lower Your Car Insurance
Having an idea of what companies are looking at to base your premium gives you a good starting point on how to save some money. Of course, there are some things you can’t easily change, such as your marital status or years of driving experience. But these are the top 5 things you can work on or consider doing to lower your costs:
1. Review Your Coverage
The first and often simplest thing to do to lower your car insurance premium is review your coverages. You can do this by calling your agent or the company directly and utilizing their expertise to determine what coverages you may need. You never want to sacrifice coverage if you can help it, but there may be some things you’re paying for that you may not need. For example, if your car is older and not worth much, you may not need to pay for comprehensive or collision coverage. Or if you have a roadside provider like AAA, you may not need to keep your roadside assistance coverage with your insurer.
Another way to lower your price with coverage changes is to potentially increase your deductibles. If your car has significant value or you are still paying off a loan, you may want to price out what it would cost for higher deductibles for the comprehensive and collision coverages.
A good rule of thumb is to check sites like Kelley Blue Book or NADA to determine the value of your car. You do this by inputting your car’s specifics, such as the year, make, model, mileage, and condition. If your vehicle is worth an amount you can comfortably afford if it were totaled, and you own it outright (meaning you are not leasing or making monthly payments), you can remove the comprehensive and collision coverages without worry. Use the money you save monthly for any future repairs or a new car!
Case Study Example
Amelia owns a 2012 Honda Accord with automatic transmission and the standard equipment. It has over 100,000 miles on it but is in pretty good condition with no mechanical issues. She has just finished paying off the loan and is looking for ways to save some money. Kelley Blue Book estimates the value of her car to be between $5,000-$6,500. Amelia is currently paying around $650 every six months for comprehensive and collision coverage with $500 deductibles, rental car coverage and roadside assistance. Removing these coverages could save her about $300 on average. With these figures, she can now make a better decision on whether removing this coverage is worth an extra $50 in her pocket every month.
2. Improve Your Credit Score
Insurance companies often use a credit-based insurance score to determine how likely you are to file a claim. Like a credit score, it is a three-digit number based on your payment history, outstanding debts, types of accounts, and how long you have had those accounts open. While they are two different scores, the insurance score is influenced by your credit. Therefore, the more you improve your credit score, your insurance score will increase and potentially lower your premium.
Some states have found the use of insurance scores in pricing unfairly discriminatory and have banned its use altogether. But for many states and companies, the score is run initially at inception and every renewal after that. However, this is not always the case. In fact, many will run it once and not again unless you specifically request it. Depending on your state and insurance company, you may be able to request a re-score once every few years. This is essential if you’ve worked on improving your score and want to reap the benefits. Give your agent or company a call to inquire about how to request one formally.
Additionally, if your credit was adversely affected by certain events, such as a divorce or death of a spouse or child, you may qualify for an extraordinary life exception. Insurance companies offer these exceptions to customers who have had their rate negatively impacted by their credit or who have been declined insurance. With this exception, insurance companies disregard credit in the policy pricing, so it has no impact on the price. It may be worth calling your insurance company if you think this is the case for you.
Case Study Example
Lucy routinely pays all her bills on time and has eliminated any outstanding debt. Her hard work has paid off and she has seen an increase in her credit score. To see if this improvement will impact her insurance rate, Lucy calls her agent to see if she qualifies for a re-score. The agent will check her eligibility with the company and call her back. But in the meantime, she decides to shop around and see how other companies would rate her with the higher score. Because companies weigh insurance scores differently, it’s difficult to say how much she can potentially save with her current company. But new companies are quoting her $150-$300 less than what she’s paying now for the same coverage. It could be the improved credit score making the difference.
3. Look for Discounts
Another great way to lower your car insurance is to take advantage of any applicable discounts your company may offer. Some common discounts offered by most companies include the following:
|Common Auto Insurance Discounts|
|Multi-Car Discounts||Having multiple cars on one policy|
|Good Student Discounts||Youthful drivers who earn a cumulative grade of 3.0 or better|
|Claim/Accident-Free Discounts||Not having any claims or accidents in a 36- 60 month period|
|Anti-Theft Devices||Having an alarm on your car|
|Student Away Discount||Young driver who is 100 miles or more away at school without a car|
|Defensive Driving Discount||Taking a company approved defensive driving course|
|Paperless Discount||Getting electronic documents instead of paper copies|
While these discounts by themselves will definitely save you money, they’re not going to drastically change the price of your policy unless you qualify for all of them, which is rare. However, there are some discounts insurance companies offer that may make a significant difference in what you pay. Here are some that you will want to look for:
- Affinity/Group Discounts – If you are part of a specific group or organization, you may qualify for discounts with certain insurers. Some insurance companies will partner with universities, employers, or professional organizations to offer discounts to their members. The discounts offered can vary but range anywhere between 5%-25%. To see if you qualify for an affinity discount, check with any organizations you may be a part of and ask about insurance partnerships. You will often get marketing materials advertising these partnerships, so keep an eye on your mail!
- Military Discounts – For veterans or active duty military, many insurance companies will offer a discount of about 15%. In addition, USAA is a company specifically dedicated to military members and their families. Not only are their rates competitively priced, but they cater to this niche demographic, which means they offer specialized services such as help with deployment.
- Multi-Policy Discounts – You may be familiar with “bundling,” which refers to having multiple policies with one company. This is usually a great way to save money on both lines of business because companies will offer a multi-policy discount for each. For example, if you have an auto and a homeowners or renters policy with the same company, you will often get a discount on both. The discount can vary but is typically around 10%. It’s important to note as well that while multi-policy discounts are a great way to potentially save money, the convenience of having one company for multiple policies often makes it worth the bundling. But if you are less concerned with convenience, you could potentially save even more by having two separate policies with two different companies. Be sure to quote both options to make sure you are saving the most money you can!
- Payment Plan Discounts – How you pay your insurance company can save money. Many companies will offer significant discounts for paying your policy premium in full if you can do so. Understandably, this is not something that everyone can afford to do. But most companies will charge an installment fee for every bill they send out, so if you can afford fewer installments comfortably, you can save on those fees. Companies may also offer discounts for paying with EFT or autopay, in addition to waiving installment fees, so definitely check with your carrier on what discounts are offered for payment plans.
Car Insurance Discounts By Company
|Discount by Company||Average Discount Amount|
|Liberty Mutual Military Discount||Up to 10%|
|Liberty Mutual Low Mileage Discount||No specific discount for low mileage but on average, driving less than 7,500 miles a year can save up to 26% annually|
|Allstate Military Discount||Between 10%-25% in select states|
|Allstate Smart Student Discount||Up to 35% depending on the state|
|Allstate Safe Driving Club Discount||A 5% bonus for being accident free every 6 months|
|Geico Military Discount||Up to 15%|
|Geico Low Mileage Discount||No specific discount for low mileage but on average, driving less than 7,500 miles a year can save up to 27% annually|
|Geico First Responder Discount||Between 5%-20%|
|Geico College Graduate Discount||Discounts are available for alumni of certain universities and colleges up to 8%|
|Geico Safe Driver Discount||Up to 26% for being accident free for the past 5 years|
|State Farm Low Mileage Discount||Can vary but ranges from 1%-2% for every 500 miles less you drive|
|State Farm Good Student Discount||Up to 25%|
Case Study Example
Ellie is a senior in college and has car insurance through Allstate. She has a 3.0 GPA and a car she keeps on campus, but rarely uses it. She may take it out every once in a while to drive home, or to go out with friends. But it mainly stays parked and she definitely drives less than 7,500 miles annually. Because Ellie drives so infrequently and is a cautious driver, she hasn’t been in any accidents for the four years she has been in school. In fact, she can’t remember the last time she had one. With Allstate, she can potentially get a 35% discount for being a good student in addition to saving up to 23% for her low mileage. For being claim free, she gets a 5% bonus every policy term. Annually, she saves 68% in car insurance. Those discounts can add up!
4. Improve Your Driving Record
This may sound obvious, but the better your driving record, the lower your car insurance policy price. However, you can’t erase any past accidents or violations, so what can you do? Insurance underwriters will typically look back at 3-5 years of driving history to determine the pricing and eligibility of your policy. So if you have any accidents or violations you are paying extra for, you may see your price drop as they start to drop off your record.
As this activity ages out, or even if you have no prior claims or tickets, you can keep your record clear by being a cautious driver. Imagine you have a cup of hot coffee on your dashboard and drive in such a way that you won’t spill it. Avoid distractions by not using your cell phone, obeying the speed limits, and try not to brake harshly. All of these will help to mitigate accidents. However, even the most conscientious drivers will get into crashes. It’s unfortunately inevitable.
If the damage to your car is minor and no one is injured, it may make sense to pay out of pocket for repairs rather than filing a claim. Your premium won’t be affected, and you’ll get to keep any claim-free discounts you may have earned.
Another way to improve your driving record is to take advantage of telematics or usage-based insurance. Not only do these programs allow you to pay your premium based on your driving habits, but they often give you tips on how to improve. Many of these companies also have apps that gamify the experience, so it’s engaging and fun to see your driving score and compare it to others in your household. If your current company doesn’t offer something like this, there are other apps you can try, such as DriveSmart, or DriveWell Go.
Case Study Example
Rick is not always the most careful driver. He inadvertently tailgates when the cars in front of him are moving too slow. As a result, he had a couple of accidents over the past few years where he was at-fault, and his insurance premium increased significantly. His wife recently signed up for Progressive’s usage based program, Snapshot and suggested he give it a try. Right off the bat, he gets a 5% discount for just signing up in the program. Not off to a bad start! With the Snapshot app, he gets personalized tips on what he does well on the road and what improvements he can make to drive better. He hates to admit it, but it’s fun to compete with his wife and see who is a better driver overall. He even enjoys getting emails from the company on how his rate is being impacted. By using the app, being rated on his driving, and getting some tips and tricks along the way, Rick sees a $150 decrease in his insurance price at its next renewal. And with his accidents dropping off his record within the next year or so, his rate could drop by another $200-$300!
5. Shop Around
The best way to ensure you get the lowest price for auto insurance is to shop around for different rates. Most insurance companies don’t charge any fees for canceling your policy in the middle of a term, but it’s recommended that you get quotes at every renewal to potentially switch at that point. As mentioned, insurance companies will look at some rating factors differently than others, so it’s possible to find competitive rates elsewhere. Especially if they are offering different discounts than your current company.
There are a few ways you can get quotes from various companies without inputting your information every time. You can either find a local independent agent to quote you with a couple of insurance companies they write for or use an insurance aggregator for quote comparisons. Both will allow you to find the lowest price and switch if you are compelled to do so. Remember that a lapse in coverage is a significant rating factor for insurance companies. To prevent gaps, cancel your current policy and start your new one on the same day.
Case Study Example
Anthony just got his renewal in the mail and his car insurance is going up $25 a month, depsite not having any accidents or tickets. He calls his insurance agent and they review his coverages and discounts. He doesn’t want to lower his coverage and he has all the discounts he qualifies for with his current insurance company. Anthony goes online and finds a website to quote his car insurance with various carriers. After inputting his information and making sure the coverage matches what he currently has, he gets quotes from a few companies. Most of the quotes are comparable to what he’s paying now, but one or two of them are less. He follows through with the process, confirms the coverage is identical to what he has now, and provides his driver’s license number and VIN so the company can run his reports. Once completed, he finds that the price is very close to what he will be paying with his new company, so it might not be worth switching now. Anthony ultimately decides to stay with his current carrier but will check again at his next renewal to confirm his rates are still competitive.
Bonus: How to Lower Insurance Costs With a Teenage Driver
All of the suggestions above on how to lower your car insurance may also help if you have a newly licensed driver in your home. But you can do some other things to lessen the financial impact of your teen being added to your policy.
- Vehicle Consideration – First and foremost, carefully consider what car, if any, they are going to be driving. Generally, a newer car with the latest technology will be more expensive to insure than an older one without all the bells and whistles. Stay clear of the higher-end or luxury vehicles and look for safe but affordable options. Suppose you are buying a relatively inexpensive car to repair or replace. In that case, you also may not need to worry about adding comprehensive and collision coverage, which can help keep the price down.
- Driver Training – Many states require a teenager to undergo a driver training program to get their license, but some do not. Not only is it a good way for your newly licensed driver to get some experience behind the wheel, but almost all insurance companies offer a discount.
- Consider Exclusions – Another option is to look into excluding your teenager from the policy altogether. Not all companies provide driver exclusions, but it’s an excellent way to keep the price down if they do. Insurance carriers will require you to list your teenager on your policy if they are licensed and live in the home, regardless if they are using your car. Exclusions allow you to meet this requirement without seeing a price increase. It’s important to note that there would be no coverage for your car if the excluded driver is found to be using it when an accident occurs. So exclusions should be considered carefully to not jeopardize coverage.
There are various factors used by insurance companies to determine what you pay and just as many ways to save a few bucks. But while the price is undoubtedly an important consideration, it shouldn’t be the only one. Regardless of which company you choose, be sure to research and find one that is reputable, financially stable, and there for you when you need them. Otherwise, what are you really paying for?
Lower Car Insurance FAQ:
Q: Is it cheaper to have separate car insurance?
A: It might be! While companies will offer discounts for bundling your car and home or renter’s policy, that doesn’t guarantee your car insurance won’t be less expensive at another company without the discount. The best way to confirm is to shop around and get quotes with and without the bundle discount.
Q: How much do you save paying car insurance annually?
A: How much you can save by paying your car insurance in full, rather than monthly, will depend on the insurance company. But as a whole, customers can expect to pay about 5% less by paying upfront. You also save on installment fees that may be charged to generate a bill every month.
Q: Does lojack lower car insurance?
A: Installing a lojack device on your car can definitely save you some money, but not as much as you might think. Some companies will give a discount of about 10%-15% on your insurance, but off the price of comprehensive coverage only. So if you don’t have comprehensive and collision on your policy, your price won’t change. Even with this coverage, the savings really only amount to $15 to $20 annually.
Q: Is car insurance lower if you own your car?
A: Not necessarily. What causes your car insurance to be more costly when you have a loan or lease is the coverage the bank will most likely require you to carry. They will ask you to purchase comprehensive and collision coverage, often referred to as “full coverage”. When you pay off your loan or your lease is up, you can remove the coverage to lower your price. But you should check the value of your car first, to make sure it’s worth doing.
Q: Are older cars cheaper to insure?
A: Generally, older cars will be cheaper to insure because they are less costly to repair or replace than newer ones. However, there are always exceptions. If you’re replacing your 2020 Toyota Camry for a 2015 Porsche Cayenne, for example, you could see a price increase in your car insurance.
Q: Can you negotiate insurance prices?
A: Insurance is not a business where you can haggle or negotiate prices. It is a highly regulated industry where insurance companies have to submit their prices to each individual state they operate in for approval. In other words, the prices are what they are. However, discounts, coverage reviews or comparison shopping are all ways you can potentially lower your insurance if you think you’re paying too much.
Q: How to lower your car insurance after a ticket?
A: If you get hit with a moving violation, your insurance may be impacted for a little bit. But some companies may give discounts for completing a defensive driving course, which can help off set the cost. You can also look into usage-based insurance programs which put more emphasis on your driving behaviors rather than prior driving record.
Q: How long does it take for car insurance to lower?
A: That depends on a number of different factors, such as why your car insurance is higher than what it would be normally. Inexperienced operators often pay more, as do drivers with accidents or violations on their record. Typically, once drivers hit the age of 25, or their accidents or tickets get to be over 3 years old, the price of insurance will go down.
Q: How to find lower car insurance?
A: The best way to find lower car insurance is to shop around. Insurance companies almost universally use the same factors to base your price, but will weigh these factors differently. Call your local independent agent or use an insurance aggregator to find the best price.
Cara Carlone has been in the Insurance Industry for over 15 years with experience in both personal and commercial lines. She has an Underwriting background and holds her CPCU, API and AINS designations from The Institutes. She lives in Rhode Island with her husband and 3 daughters.