This article was originally published on Bankrate.com by Mariah Posey.
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The average American spends just 2.4% of their annual income on car insurance, but at about $140 per month, it makes sense why most drivers look to save where they can. Whether you live in a region with the lowest average car insurance rates or one where car insurance tops the national average, there are several ways to reduce this necessary expense.
Although finding cheap carriers is a good first step, it is not the only effective method to save on auto insurance premiums. As complex as car insurance can be, there are many simple ways to lower the cost and give yourself more room in your budget. Bankrate’s insurance editorial team has developed a list of ways to help reduce your car insurance cost.
How you can lower your car insurance
While there is a long list of car insurance providers you can choose from to find the best rates, you can also do other things to help make your car insurance more affordable.
While all car insurance policies are structured in similar ways to provide coverage for various vehicle-related incidents and liability, you may be surprised how much of an impact other individual factors have on your rates. Every insurance company uniquely assesses risk, and things like your ZIP code and driving record could result in different rates from different insurers. Before purchasing a policy or switching providers, request quotes from several providers for identical coverage amounts to see which one offers you the best rate.
Quote comparisons could also be helpful around policy renewal. Because the market changes regularly, there is always a chance that your current insurer no longer provides the best rate for the coverage you need. Shopping around could give you a sense of whether you are paying too much for car insurance.
The table below showcases the nation’s largest insurance companies according to market share, and their average quoted premiums as of 2021.
Take advantage of discounts.
Insurance companies typically offer several discount opportunities, many of which can be combined for even more significant savings.
Here are some of the most common car insurance discounts offered:
- Low mileage discount: You could save by driving under a certain number of miles per year, as specified by the insurer.
- Multiple policy discount: You could save by insuring multiple policy types under the same company. Bundling your home and auto insurance typically offers the most significant savings.
- Safe driving discount: You could save by having a clean driving record. In addition to your driving record, if you maintain safe driving habits, you may earn an additional discount.
- Safety feature discount: You could save by driving a vehicle that has safety features, like anti-lock brakes and an anti-theft device.
- Profession-based discount: You could save if you are part of a specific profession, like a teacher.
- Good student discount: Younger drivers can be more costly to insure, but good student discounts could help to reduce that cost. For example, insurers will typically offer a student discount to those who maintain at least a B average in school.
Reassess your insurance coverage.
In the case of an accident, it helps to be as fully financially protected as possible. To do so, most people opt to purchase both collision and comprehensive coverage — also known as full coverage — when purchasing car insurance. However, those with older vehicles may find that this is not always the most beneficial option.
However, because insurers generally pay out up to the actual cash value of your vehicle, purchasing comprehensive and collision coverage for a highly depreciated or older car may be counterintuitive. You may be paying more for comprehensive and collision coverage than necessary if the amount the insurance company would pay you if your car was totaled is less than the cost of your annual premium. While liability-only insurance will leave you without coverage for damage to your vehicle, it does help provide you with financial protection against potential lawsuits and an injured party’s medical expenses. You may want to speak with a licensed insurance agent to determine how much coverage is right for you.
Average cost of car insurance in the U.S.
Car insurance coverage includes a deductible or the amount the insurance company deducts from your payout if you file a claim. Because your insurance company will offer multiple options for your deductible amounts when you purchase car insurance, it may be worth considering higher deductibles to lower your premium. The higher out-of-pocket cost will naturally reduce your premium. Just be sure that you can afford the deductible if you have an accident before selecting a higher amount.
Improve your credit.
Insurers often use a credit-based insurance score to help price premiums, except in states where the use of credit to calculate rates is banned. That said, in most states, those with excellent credit usually receive cheaper auto insurance.
If your credit could use some work, consider taking time to improve your credit score. While significant credit boosts can take time, paying off debts, setting up a monthly budget to help track bills and making on-time payments can go a long way toward reducing your insurance expenses.
Average annual full coverage car insurance rates by credit score
How to find a cheap car insurance company.
Car insurance comparison shopping is one of the best ways to find the cheapest car insurance for your needs. Although premiums vary by state, ZIP code and other factors, it may help if you add some additional steps to your process.
Luckily, whether you are currently insured or looking for a brand new policy, car insurance quotes are easy to get. You may talk to a local agent, but online shopping provides an efficient way to scope out your best options without significant legwork. Because costs can vary drastically by insurance company, it helps to know your desired coverages beforehand so you can accurately compare multiple quotes against the same amounts of financial protection.
For example, if the average full coverage policy costs around $1,674 a year, you could see rate variations of up to hundreds of dollars across multiple companies. However, you may find that one insurer offers better rates when roadside assistance is added, which could be an additional $20 per year. With several additional coverages, the difference between providers is likely to be even more significant, so accurate comparisons are crucial.
If you have a tight budget, you may decide it is worth reviewing which coverages are most important to you. Maybe roadside assistance is a must, but other optional coverages, like rental reimbursement, are unnecessary for you. By reviewing your desired coverages before asking for quotes, you might be able to pinpoint some areas where a standard policy is sufficient.
Many insurers now offer tools on their websites where you can compare insurance quotes. Some companies compare quotes with major competitors side-by-side. However, you may still want to verify these quotes independently.
Within your search, you may also want to include small or local carriers. Although many larger insurers are household names, smaller companies may offer lower rates and tailor coverage to fit local needs. It could also be worth looking into the company’s customer satisfaction and financial strength. With both of these factors making up a large part of the insurance experience, you may find that selecting a financially stable company ultimately saves you more money by ensuring a timely claim payout. Industry-trusted agencies, such as J.D. Power and AM Best, could be great places to start your research.
Lastly, to find an affordable car insurance company and lower your car insurance costs, you could benefit by taking your driving history and habits into consideration. Each provider is different, and some specialize in offering insurance for specific groups of motorists. For instance, USAA provides coverage for military members and veterans, including those who may be insuring a vehicle while on deployment, and The General primarily offers high-risk auto insurance. Multiple insurers provide usage-based and pay-per-mile car insurance policies. If you drive less than 12,000 miles per year or regularly employ safe driving techniques, it may serve you to seek companies that offer optimal savings for your driving habits.
Frequently asked questions
What is the best cheap car insurance?
Each driver has unique personal factors, including age, location and driving record. Because these factors influence the underwriting process and the final rate you pay, the best cheap car insurance provider will be different for everyone. To narrow down your list, consider which providers offer low rates on average in your area and how many discounts you would be eligible for with a particular policy.
Is cheap car insurance available for high-risk drivers?
During the underwriting process, insurers consider multiple factors to help determine your rate. Drivers with bad driving records are typically quoted more than the average driver with a clean driving record due to a higher level of insurable risk. However, if you fall into a high-risk category, there are still affordable car insurance companies available. For instance, most top providers have several discounts high-risk drivers could be eligible for, such as bundling policies and auto-pay.
Other groups that may be considered high risk include teens, young drivers, those with a lapse in coverage or those in high-crime areas. With research, most drivers can find affordable car insurance coverage.