How to Lower Your Car Insurance Costs: A Comprehensive Guide

If your latest car insurance bill gave you sticker shock, you’re not alone. Nationwide, the cost of car insurance rose an average of 20.6% between January 2023 and January 2024, according to the Bureau of Labor Statistics. Here are six ways to lower your car insurance costs, including switching insurers, raising your deductible, and looking for available discounts.

Shop Around

Technologically sophisticated vehicles and shortages of qualified mechanics have made cars more expensive to repair, broadly driving up car insurance costs across insurance carriers. However, it’s still worth checking to see if a different insurance company offers lower prices.

You can compare car insurance prices by visiting insurance company websites or calling insurance companies. You’ll be asked for information about yourself and any other drivers in your family, your vehicles, driving habits, and any recent accidents or violations. To evaluate insurance quotes accurately, be sure to compare the same amount and type of coverage with each insurer.

One convenient way to evaluate car insurance costs is to use an online marketplace that gathers insurance quotes from multiple carriers in one place. This can save you time and help you find the best deal.

Raise Your Deductible

Your car insurance deductible is the amount of a claim you’re responsible for paying out of pocket; your insurance company covers the rest. For example, if you have a claim for $2,500 in damages to your car and a $500 deductible, your insurance company pays $2,000 toward repairs and you pay the remaining $500.

Insurance companies usually offer deductibles ranging from $0 to $2,500. Choosing a higher deductible typically reduces your premiums. However, it’s important to make sure you can afford your deductible if you have a claim. Some insurers require you to pay the deductible upfront before they pay your claim. If you don’t have an emergency fund or other source you can tap for your deductible, you might have to get along without a car until you can come up with the cash.

Opt for Usage-Based Insurance

If you don’t drive much, you might save money by choosing usage-based auto insurance. Insurance companies generally offer reduced rates if you drive fewer than 12,000 or 10,000 miles per year; those who drive under 7,000 or 5,000 miles annually could save even more.

There are various options for low-mileage drivers:

• Low-mileage insurance monitors your mileage by asking you to report your odometer reading, getting the reading from a third party, or installing a device in your car.
• Pay-per-mile insurance charges a daily base rate for each day you drive and a per-mile fee (typically a few cents) for each mile. The insurer places a device in the car to track your mileage.
• Usage-based car insurance uses in-car devices or smartphone apps to track not just your mileage, but also how you use your car. By reporting the time of day when you drive and driving behaviors such as speed and braking frequency, these devices help insurers evaluate your risk level and adjust your premiums accordingly.

Look for Discounts

Check to see if you’re taking advantage of all the car insurance discounts out there. Common discounts include:

• Multi-policy discount for “bundling,” or buying more than one type of insurance policy from the same carrier
• Multi-vehicle discount if you insure more than one car
• Vehicle-related discounts such as new-car discounts, alternative-fuel discounts, or discounts for factory-installed safety and anti-theft equipment
• Payment discounts for paying your annual premium in full, setting up autopay, or going paperless
• Discounts for getting quotes online or purchasing your policy online
• Discounts for taking defensive driving courses
• Good student discounts for high school and college students
• Discounts for owning a home (even if your home insurance is from a different insurer)
• Senior discounts for drivers ages 55 to 69
• Affiliation discounts for members of certain organizations, employees at certain companies, or military service members

Reduce Your Insurance Coverage

Are you paying for coverage you don’t really need? Reducing your car insurance coverage could save you money. Just be sure you have enough coverage to protect you in case of a claim.

Collision and Comprehensive Coverage

Standard car insurance generally includes collision coverage for damage to your vehicle caused by an accident and comprehensive coverage that covers other causes of damage (such as vandalism or a falling tree branch). However, the most these coverages pay out in a claim is the value of your vehicle.

If your car is paid off and not worth much, and if you could afford to repair or replace it out of pocket, dropping collision and comprehensive coverage could save you money. At minimum, most states require drivers to carry liability insurance.

Lenders generally require minimum levels of collision and comprehensive coverage for leased or financed vehicles. If your car isn’t paid off—or you just don’t want to give up collision and comprehensive coverage—you might be able to reduce your premiums by increasing your deductibles for these specific coverages.

Insurance Extras

You could also save on car insurance by eliminating extra coverage. Many plans include roadside assistance coverage, which you may not need if you belong to a plan such as AAA. Dropping rental reimbursement coverage could cut your premiums too.

Before reducing your insurance coverage, consider how the changes might affect your out-of-pocket costs if you have an insurance claim. For instance, travel website Kayak puts the average cost of a rental car at $50 a day. Without rental reimbursement, you could be on the hook for $350 if your car spends a week in the shop for a covered claim.

Improve Your Credit Score

Having good credit could potentially lower your car insurance costs. Auto insurance companies in most states can check your credit-based insurance score when they set insurance premiums. Although these scores are different from the credit scores lenders use, both scores are based on the information in your consumer credit report.

Checking your credit score can be a good indicator of where your credit-based insurance score might fall. Bringing late accounts current, paying bills on time, and reducing your credit utilization could help increase your credit score, which could mean lower car insurance premiums.

The Bottom Line

If you’re looking for ways to save on car insurance, take a little time to investigate your car insurance options. Reducing coverage, raising your deductible, and seeking discounts could help you cut costs—just be sure you keep enough coverage to safeguard your finances in case of an accident.

Check your credit report and score before you shop for car insurance so you can work on improving your score if necessary. Maintaining good credit could save you money on car insurance without compromising coverage.

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