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Smart Money

Tips on How to Lower Your Car Insurance

If you own a vehicle, car insurance is a necessity that protects you financially, but your rate is based on many different factors. Learn what causes your insurance to increase and tips on how you can lower your monthly or yearly premium.

Rachel Velez • February 2, 2022

In This Article

  1. How can you save money on car insurance?
  2. 6 ways to lower your car insurance
  3. FAQs
  4. Final thoughts

According to U.S. News & World Report, data from 9 of the country’s largest auto insurance companies shows that the average person spends $1,321 annually to insure their vehicle. That breaks down to approximately $110 a month, which doesn’t seem too bad. 

But, what if you found out you could potentially get an even lower rate by learning a few simple tips? If you take the time to explore different rates, build your credit, and keep a good driving record, you may be able to cut the cost of your car insurance in no time. 

How can you save money on car insurance?

There are several different tips and tricks to save money when it comes to car insurance. You may think there’s nothing that applies to you and your situation, but most auto insurance companies have resources to help lower your monthly rate. Although these companies operate to make a profit, they ultimately want to maintain happy customers. A fair premium is a huge part of that. Many Americans waste money they could be saving on their auto insurance by just not taking the time to do a little research.  

It doesn’t take that much legwork to find the right information. Sometimes it’s a matter of calling your car insurance company and discussing what they offer. It’s okay if you don’t know exactly where to start. Let’s take a look at the moves you can make in the near future that may save you hard-earned cash that can go toward other savings goals, like an emergency fund or high-yield savings account.   

6 ways to lower your car insurance

There are a number of strategies you can use to save on car insurance. Here are 6 ways to take action as you work to lower your car insurance rate:

1. Compare prices

The best place to start is comparing prices and shopping around a little bit to ensure you’re getting the best rate. Whether you’re starting from scratch or already have an insurance provider, you can inquire with other insurance companies to see what prices they can offer. 

It’s good practice to obtain quotes from other companies every year or so in order to guarantee you’re getting the best rate and maximizing your savings. Save time and make it easier on the eyes by using an online car insurance comparison tool to look at the costs of several different providers at once. 

While comparing prices, you should get quotes from at least 3 different insurance companies. To do this, most companies let you receive a quote online by inputting your personal information, or you can also call some companies directly and speak with an agent. You can also contact your state’s insurance department, as they may provide price comparisons of major issuers where you live. To receive comparable quotes, you should provide the same personal information to each company you inquire with, and if possible, ask for all of the quotes on the same day. Rates can change slightly from day to day; therefore, it’s best to ask for your quotes on the same day for an accurate comparison.

Don’t be afraid to ask for recommendations from friends or relatives as well. They may be able to give you the information you need so you can cut back on your own research. Also, take into consideration agents or companies that take the time to answer your questions, especially when it comes to pricing. This way you know you are dealing with a reliable agency that you can trust.

2. Take advantage of discounts

One of the top ways to save on car insurance rates is by seeking available discounts and taking advantage of them. You may know about some of the typical discounts offered by car insurance companies, such as multi-car policy discounts or good driving discounts, but most large issuers offer an array of other discounts most people aren’t aware of. To make sure you’re getting all the discounts you’re entitled to, ask your agent to review your possible savings every year.

Other potential discounts may be available for:

  • Specific occupations (Example: being a teacher or a nurse)
  • Military service members
  • Students with good grades
  • Senior citizens
  • Having safety features on your vehicle
  • Parking your car indoors

A majority of insurers will grant discounts for other factors, such as driving history, vehicle safety features, paperless and automatic billing, or paying for the entire policy upfront. You can take a look at your insurance provider’s website or call to speak to a representative to find all the discounts you may qualify for at a given time.

3. Request a higher deductible 

Another quick way to cut down your car insurance costs is by asking your current insurance company for a higher deductible on your policy. The deductible is what you pay before your insurance kicks in, in the event of an accident, theft, or other damages to your car. Usually, the higher your deductible is, the lower your monthly premiums will be. 

Be aware that as you raise your deductible, it will save you money each month, but your out-of-pocket expenses to repair damages on your car could be a lot higher. 

There are pros and cons to requesting a higher deductible, as not everyone has a few thousand dollars put away for repairs or damages. If you take this route, make sure it fits your financial circumstances. 

4. Boost your credit score

It’s no secret that your credit score affects a lot of your financial decisions and offerings. However, people are sometimes surprised to find that companies also consider credit ratings when determining things like car loans or insurance premiums. 

By working to improve your credit, you may see a drop in your insurance costs over time. After all, evaluating credit is becoming more commonplace for insurance companies as 92% of all insurers take a look at your credit when calculating rates. If your credit score needs some work, start by looking at your credit report to make sure it’s accurate. 

Mistakes are commonly found on credit reports, and simply removing them can raise your score drastically. Other ways to improve your credit score include making on-time payments, paying down bigger debts, and not opening new accounts on a regular basis. As your credit score improves, you should see lower car insurance costs.

5. Improve your driving record

Being a safe driver on the road is something you can do for free! With good driving habits, you can protect yourself and others while potentially saving money on your car insurance. The more mindful you are, the fewer accidents or moving violations you’ll acquire, which will likely reduce your rate. Follow the rules of the road and pay attention to what’s going on around you for better driving habits and a chance at better insurance rates.

And if you’re really making moves and are serious about lowering your rates, you may consider asking your insurance company if taking a defensive driving course will lower your rate. If you get the go-ahead from your insurance carrier, check with your local DMV to see what defensive driving courses are offered in your area. 

6. Reduce your coverage

As a last step, you may consider dropping part of your coverage to lower your monthly or annual premiums. However, you have to make sure it’s a smart move for your particular situation or financial plan. You must also ensure compliance with state insurance laws and lender- or lease-related requirements.

If you drive a really old car or one that’s completely paid off, you might consider removing or reducing your collision or comprehensive coverage on your vehicle. Collision pays for repairs if there’s damage to your car from an accident. Comprehensive pays for things such as a stolen vehicle, vandalism, hitting a deer, etc. 

Looking to Build Your Credit?

Check out Chime’s Credit Builder Secured Visa Credit Card1 to start working toward a healthy credit score today2.

FAQs

Why is my car insurance so high to begin with?

There are several reasons you could be presented with a high premium for your car insurance from the start. It may be due to a poor driving record, an extensive history of claims, or a poor credit score. Other considerations include the type of car you drive, your age, if you have children on your policy, or if your car has high mileage. 

What causes car insurance to increase?

The most common reasons for car insurance rates to increase in price include accidents and traffic violations, address changes, new vehicles, and claims in your zip code. If your premium goes up and none of these situations apply to you, contact your insurance company to find out why the increase occurred. 

When does car insurance typically go down?

Aside from using the information above to lower your car insurance rate, you may experience a decrease in price automatically as time goes on with your insurance carrier. According to Allstate, drivers see their car insurance premiums start to go down around age 20, with a big drop around age 25. Rates usually remain the same for decades beginning around age 35.

Final thoughts

As prices continue to rise for many things in life, your car insurance doesn’t have to be one of them. These tips and strategies will keep you on your toes when it comes to saving money on your auto insurance.

Remember to always keep your needs and budget top of mind when working on getting a lower rate. Revisit these tips every 1 or 2 years to take advantage of all insurance companies have to offer. Otherwise, you could be missing out on some pretty big savings!

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