If you have a car and want to drive it, you’re legally required to insure it. Unfortunately, insuring a car isn’t cheap. Average car insurance costs $1,323 per year, according to U.S. News Cheapest Car Insurance Rankings, and many drivers pay much more.
But just because you need car insurance doesn’t mean you have to let this bill break the bank. There are many ways you can lower these costs and make auto insurance easier on your budget.
Wondering how to save money on car insurance? To get you started, we rounded up some easy, quick steps you can take to reduce your insurance costs.
- How to save money on car insurance — 6 options
- Saving on auto insurance can be an easy money win
How to save money on car insurance — 6 options
1. Look at your current coverage and consider your needs
First, take a look at your current auto insurance policies to see how much coverage you have and what you’re already paying. Your car insurance premiums are largely determined by the kinds and amounts of coverage that your auto insurance provides.
Many auto insurance policies include:
- Collision coverage
- Property damage
- Bodily injury liability
- Personal injury protection
- Comprehensive coverage
- Uninsured motorist coverage
Not all drivers will need all of these types of coverage, and the limits for each can vary quite a bit. Consider if there are types of coverage you can cut back on to lower premiums.
2. Consider downgrading your insurance on older vehicles
An easy way to save money on car insurance? Don’t overpay by buying more coverage than you need. Compare your car’s current value to your premiums. If your annual car insurance premium is equal to or more than 10% of your vehicle’s value, you might be overpaying.
Keeping insurance rates low compared to your car’s value can be tricky as it ages, however. Cars are depreciating assets, which means they become less valuable as time goes on. If you have an older car, it might cost less to simply replace it out of pocket than to pay to have it insured.
So what coverage can you safely forego? For older or less valuable cars, you can probably skip comprehensive coverage that protects you from theft, vandalism, or weather damage. It might also be more cost-effective to skip collision coverage that protects your car and start saving for any potential repairs out of pocket, instead.
If, on the other hand, the type of car you have is a high-value luxury car, a new car, or you’re still paying an auto loan or lease — use caution when cutting back on coverage.
3. Ask about car insurance discounts
If you know the right questions to ask, you could find additional car insurance discounts for which you qualify. Here are some common insurance discounts that car insurance companies might offer and that you might even ask your current insurer about:
- Ask for higher deductibles. A deductible is the amount of money you’d have to pay out of pocket before coverage kicks in. Many auto insurance companies will lower premiums for policies with higher deductibles.
- Bundle your insurance. Chances are you probably need renters insurance or homeowners insurance in addition to car insurance. See how much you could save by bundling these together from an insurer that offers both. You may also be able to get a discount for a multi-car policy.
- Keep your car safe. Some insurers will lower your rates if you park your vehicle in a garage, and the reason is simple: Vehicles are safer from theft, vandalism, or damage when parked in a garage. Insurers may also offer discounts if you choose a car with better safety and security features.
- Check for other discounts. You might qualify for a low-mileage discount if you drive a lower-than-average number of miles. You might be able to get a loyalty discount if you’re a long-time customer or a good student discount if you're in college and have good grades. Some insurers provide a policy discount if you take a defensive driving course or have certain safety features on your car like anti-lock brakes and airbags. You could even get a car insurance discount through your employer!
4. Shop around with different providers
If your current insurance provider isn’t offering you a great deal, it might be time to start shopping around for better pricing. This is also an important step if you’ve just purchased a car and need to get it insured.
You can talk to an insurance agent, but you can also easily shop around and get quotes yourself by selecting a range of insurers. Decide on the car insurance coverage you want, then collect car insurance quotes from each company. You can see which is willing to offer you the best car insurance deal for the coverage you need.
Certain money apps could also help you find a better price on car insurance. Trim, for example, can negotiate bills on your behalf or alert you to opportunities to save — such as pointing you to providers that might offer you a better deal on car insurance.
5. Maintain a safe driving record
Finding how to save money on car insurance can be as simple as following the rules of the road. That’s because your driving record is a significant factor that’s used to determine your insurance premiums.
A driver with a record of safe driving habits is less likely to get in accidents that would result in a claim. Auto insurers will often reward this lower risk with lower insurance premiums and possibly even additional safe driver discounts.
Avoid accidents or traffic tickets and moving violations that will mar a clean driving record. Follow posted speed limits, watch for school or construction zones, come to full stops at stop signs and red lights, and signal when merging or changing lanes. Drive only when you’re alert and avoid distractions like texting while driving.
6. Improve your credit
Auto insurers don’t just look at your driving record, either — some also use an insurance score based on your credit history. That’s because in the world of insurance, enrollees with poor credit and financial habits are more likely to file claims. On the other hand, drivers with good credit are a better bet for insurance companies and are more likely to be offered lower auto insurance premiums.
To set car insurance rates, insurers consider many of the same factors used to formulate credit scores. So taking steps to raise your credit score can also lead to insurers offering you better rates, including on car insurance.
Consider taking action to raise your credit score quickly. You can lower your credit utilization by asking for a higher credit limit or paying down balances on revolving debt, for example. Or you can check your credit reports and look for errors that could be mistakenly lowering your score.
Can you negotiate with auto insurance?
Yes, it’s possible to negotiate your premiums with your auto insurance company. You typically have plenty of options when it comes to car insurance providers, which means they’re all competing for your business. This works to your advantage because you get to shop around and find the best price on the policy that works for you.
If you find better offers, but want to stick with your provider, call. Then explain the better offers you found that provide the same amount of coverage for a lower price. This strategy won’t always work with your current provider, but it can help you save money on car insurance, whether you stay loyal to a company or head to a new one.
Keep in mind that you may also be able to get a lower rate if you are willing to bundle your car insurance with your home insurance, as many insurers offer bundling discounts. You can also ask about other available discounts to ensure that you're getting the best rates. While these strategies aren't necessarily the same as negotiating, they could get you a discount.
When should I drop full coverage on my car?
Many experts recommend dropping full coverage insurance once your car value falls below $2,000. Full coverage insurance pays for repairs or replacement of your vehicle if it's stolen, damaged in a crash, or damaged by something else such as a hailstorm. It isn't required (unlike liability coverage) and can be expensive, so it may not be worth paying for once your car isn't worth much. Just remember that if you don't have it, you must cover all costs out of pocket.
What happens if I can't afford car insurance?
If you cannot afford car insurance, you cannot drive or keep a vehicle registered. You are required by law in every state to maintain a minimum amount of liability coverage. Failure to do so can result in fines and potentially misdemeanor criminal charges. You can shop around to find affordable policies and purchase only minimal coverage, but remember that having less coverage means you have less financial protection if something goes wrong.
Do I get my money back if I cancel my car insurance?
If you cancel your car insurance, you will typically be refunded for prepaid premiums. For example, if you paid an annual premium in January and you cancel insurance in February, you would be refunded for the value of 10 months’ worth of insurance premiums.
However, some insurers may charge you an early cancellation fee if you cancel during the middle of a coverage period. Whether your company charges this fee and how much it might be is something you should investigate before you cancel your policy.
Saving on auto insurance can be an easy money win
Car insurance premiums are a recurring expense that’s all too easy to set and forget. But if you leave auto insurance on autopilot, you could very well end up with a high insurance bill and be unnecessarily overspending on this cost. But there are easy ways to save money on car insurance.
If you haven’t compared car insurance rates in a while, it could be time to revisit your auto insurance to see if makes some simple changes could save you money. With just a little bit of effort and research into the different insurance carriers, you might be able to lower your rates and save hundreds. And we’re sure you can find a better way to use that money, whether that’s getting out of debt, saving more money, or simply stressing less about your budget.