15 Things You Can Do to Lower Your Auto Insurance Premium
Most drivers assume there's nothing they can do to lower their car insurance premiums except to change their carrier. It is not true. There are some a driver can take to impact the rate they pay for auto insurance.
In this article, you'll learn 15 ways you can take to lower your auto insurance policy premium. To take advantage of these rates, speak with your local insurance agent. They can help you reduce the amount you are paying for car insurance coverage.
If you can't lower your rates using the tips below in this article, consider shopping for an affordable plan with lower rates using an online insurance search tool like SmartFinancial. Just enter your zip code, and we can help you find cheap car insurance quotes from several reputable agents in your area.
Why Is My Premium so High?
A bad driving record, a history of claims, and a poor credit history are all reasons why your vehicle insurance is more expensive than you would want. Additionally, if you drive a lot, drive an unsafe automobile, or have children on your car insurance, you may see a rise in your premiums.
According to the Insurance Information Institute, these factors include:
Your location and zip code
Your residence can influence the car insurance premium you pay. For instance, different areas have different probabilities of theft, crime, natural disasters, vandalism, and traffic congestion.
Your driving record
Having a good driving record matters. You'll pay higher premiums if you've been in a few accidents and or have traffic infractions because the claim payouts will impact your rates.
Car insurance costs more if you have no credit history or if your credit report is less than outstanding (poor credit). Your insurance company isn't concerned with the amount of debt you have, but they are searching for patterns of delinquency, so if you look to be a risk, your auto insurance rates will go up.
Smaller, sportier cars are victims of higher premiums. Furthermore, the idea that a red car costs more in insurance is untrue. When it comes to the car you drive, the year, make, model, body style, and age are what insurers factor in when coming up with a quote.
Age and Gender
Mature drivers usually have fewer accidents and better driving records than inexperienced teen drivers. As a result, insurance companies charge younger people ages 25 years and younger higher rates. Insurers also base rates on gender. Women tend to get into fewer accidents and receive fewer driving-under-the-influence (DUI) accidents than men. They tend to pay less for car insurance up until age 40, when the trend reverses.
Auto Insurance Coverage
Your auto insurance limits, deductible, and policy options can all affect how high your rates may be.
Occupation and Education
Two surprising factors insurance companies use to calculate your rates are your job and educational level.
People with post-secondary degrees tend to pay less money than individuals with GEDs or high school diplomas. Additionally, mid-level and upper-tier professionals pay lower rates than working-class workers.
Insurance companies claim industry research shows drivers with more education and better jobs are less likely to file claims.
According to a few insurance studies, married people received lower rates than single, widowed, or divorced people. Single individuals are more likely to be younger and less experienced drivers who tend to have more accidents than married people.
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How Long Does It Take for Insurance to Go Down?
Companies use different ways to calculate your premiums. These calculations depend on the carrier and the driver's location. Insurance companies also consider whether the accident was minor or major and whether it was your first or multiple claims.
One good thing: if you have an accident, your car insurance rate increases won't last forever. Most insurers will only consider the past 3-5 years in your driving record when calculating your premium rates.
For instance, California lists points from minor accidents on a driver's record for three years. It records significant offenses, such as a DUI, for ten years.
Your rates will increase after an accident in the following situations:
- You're at fault for a car accident.
- The cost of damages is high.
- You have multiple violations within a short time.
- Accident results in serious bodily harm or death
Your rates may not increase after an accident when:
- The other driver is 100% at fault.
- It's your first incident, and your provider has accident forgiveness.
Take a defensive driving course or driver's education class.
New drivers and long-time drivers can benefit by enrolling in and completing a driver training course. These courses are available online, at many local community colleges and through community adult education programs. The classes are affordable will help you to become a better driver.
Young and inexperienced drivers can save almost 10 percent discount when they finish an approved driver training course.
Mature drivers can also cut their rates when they take a defensive driving course. If you're 55 years or older, taking a driver's education refresher course can help you save money.
Improve your credit score.
Auto insurance companies consider a credit-based insurance score to determine your car insurance rates. These scores predict the likelihood that a customer will file an insurance claim that will cost the carrier more money than it collects in premiums.
Although credit scores and credit-based insurance scores have different purposes, they both consider similar behavior. If you have a good credit score, your credit-based insurance score will also be higher. If you have bad credit, this score is probably lower. Credit-based insurance scores consider similar behavior to credit scores. To improve your score, you can:
- Pay your bills on time each month
- Don't miss payments
- Bring your account current as soon as possible
- Decrease your credit utilization score by paying down debt
Your credit score can have a direct impact on your monthly car insurance premiums. Insurance companies charge people with good credit scores lower prices than individuals with poor credit.
The best place to learn about your credit is to request a copy of your credit report. Search your credit history for any past-due balances. If you do have any past due amounts, you should contact the creditor to make payment arrangements.
Additionally, you should make a conscious effort to pay all your bills on time. Improving your credit takes time. With some effort, you will raise it, which will help reduce your auto insurance rates.
Get a different car.
Your car insurance rate can vary depending on the type of vehicle you drive. If you are in the process of getting a new automobile, you should contact your car insurance company to find out the models that have lower relative rates.
You may also want to learn if there are vehicles with better safety records. Features that will help reduce your car insurance costs include power steering, anti-lock brakes, and an alternative fuel vehicle.
Install safety devices in your vehicle.
Many auto insurance companies offer discounts based on the safety options you have on your car. Things like automatic transmission, airbags, anti-theft systems, power steering, anti-lock brakes and other car safety features can impact the monthly premium you pay.
Reduce your daily commute and drive fewer miles.
The number of miles you drive every day can impact your car insurance rate. You can move closer to work, take public transportation, carpool or even take a shorter route. There are many things you can do to drive less. Driving less will also save you money on gas and lower the maintenance costs of your vehicle.
Bundle your auto coverage with other policies.
Many car insurance carriers offer discounts when you have multiple policies with them. While you may think moving your homeowners policy from one insurance company to another is a hassle, your car insurance agent will be more than willing to help you facilitate that process. Remember that many types of insurance may offer discounts when you bundle.
You can ask your insurer whether you can bundle the following policies with your auto insurance coverage. They include the following plans:
- Life Insurance
- Renter insurance
If you own a business, you may even want to bundle your professional and personal insurance together to reduce your premiums and get cheap car insurance rates.
Follow traffic laws and avoid getting tickets.
Traffic violations and tickets can negatively impact the amount you pay for your auto insurance. These tickets can affect your rate for three to five years, depending on the violation and your car insurance company.
Obeying traffic laws is the easiest way to prevent getting a ticket. Most insurance companies, even the DMV, use a point-based system to calculate surcharges, with points assigned to different types of offenses. It's essential to remember your vehicle insurance premiums might be affected by how many points you accumulate.
Bundle insurance with a family member or spouse.
Insurance companies refer to bundling as buying multiple policies from the same insurer. Many companies offer multi-policy car insurance discounts when you bundle several cars on the same policy.
If you are married and own two cars, you may be able to save a significant amount on your car insurance rates when you insure both vehicles together than if you separately insured them.
Pay off your car note or loan.
Lenders require you to carry a minimum level of coverage when you lease a vehicle or finance a car loan. This insurance helps to protect the finance company's investment just in case they need to repossess the car.
If you have a note or loan on your car, your lender will require that you have a minimum level of coverage on your car to protect the value of your vehicle. If you can pay off your vehicle, you will have more flexibility with the options you select.
Prepay your policy.
If you are financially able to pay for your car insurance 6 or 12 months in advance, you may be eligible for a discount from your car insurance provider. This discount will reduce the overall amount you have to pay for your car insurance.
Where you live can have a direct impact on what you pay for your car insurance. Moving a few blocks or even across the street can impact the amount you pay for your car insurance. If you are considering a move, you should contact your agent to determine the optimal area to live or how where you plan to move will impact your car insurance rate.
Sign-up for autopay.
Having your car insurance company deduct your monthly payment automatically from your bank account may make you eligible for a small discount on your monthly premium. This discount will effectively reduce the amount you have to pay for your car insurance.
Choose a higher deductible.
Deductibles are the amount of money you're responsible for paying on a covered claim. It is the amount you'll pay out of pocket if an accident occurs. They usually range from $0 - $1,500.
Some insurers will deduct this amount from your settlement. For instance, what if you have a $250 deductible and $2,000 in damages? Your insurer may give you a $1,750 check to cover them, subtracting the $250 deductible from your settlement.
Car insurance deductibles only apply if you submit a claim after an accident. If you don't drive your car very often and aren't prone to accidents, a greater deductible and cheaper rates may be a better option.
Increasing your deductible or eliminating add-on coverage on your existing car insurance policy may require you to pay more money out of pocket if a car accident occurs.
For instance, raising your car insurance deductible can lower your premiums up to 40 percent with some carriers, like Nationwide.
File claims selectively.
You should be cautious when filing a claim. Submitting one may result in higher premium rates in the future since every claim made is recorded on your car insurance company's policyholder record. After an at-fault claim, most companies will charge you extra for up to three years.
Some people choose to pay for repairs out of pocket rather than filing an insurance claim with their insurer if the repairs are cheap. It helps them to avoid having to pay a higher premium rate in the future. Therefore, if you can afford to meet the out-of-pocket charges yourself, there's no need to start the claims process.
Maximize eligible discounts.
As you shop around for insurance, ask each insurer about discounts their insurance company offers. Some carriers provide savings for the following categories:
- Federal employees
- Military members
- Student drivers with good grades
- College students away from home,
- Loyalty programs
You can also ask whether the insurance company has a usage-based program. Your car insurance will track your safe driving habits using geolocation data through a gadget or smartphone app. In exchange, you'll receive a discount.
Now, you know the steps you can use to lower your car insurance rates. In the next section, you'll learn other steps you can take to get more affordable auto insurance rates for yourself.
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Can You Negotiate Lower Car Insurance Rates?
Federal and state governments regulate the car insurance sector, so you can't negotiate your auto insurance coverage rates.
As a result, when it comes to price, insurers must adhere to government regulations. Car insurance firms can use several elements to establish their premiums based on perceived risk within certain limitations.
Because these risk criteria are preset, the car insurance agent or customer service professional working on your policy has no room for price negotiation.
Although you cannot negotiate car insurance coverage, you could strategically negotiate your car insurance shopping experience to get the best deal on the coverage you require.
You can get the best insurance rate by comparing auto insurance quotes from several companies. Just enter your zip code on this page to get started. We'll provide you with rates and premiums from local insurance companies within your area.
When Should You Lower Your Car Insurance?
Most states require drivers to purchase a minimum amount of insurance coverage to drive on their roads. Depending on your area, you'll need to get a combination of liability insurance (bodily injury and property damage liability), uninsured/underinsured motorist insurance, personal injury protection insurance, and other policies.
In most states, comprehensive and collision coverage are optional coverages. A lender or bank may require a policyholder to buy this coverage when they have a car loan or lease a vehicle.
There are several tips to consider before you drop car insurance coverage.
Find out the value of your car. It will help you to calculate the cost to drop comprehensive and collision coverage.
Car owners must consider possible car insurance payouts of any accident-related or comprehensive claim in advance.
Consider dropping collision and comprehensive insurance if it surpasses 10% of the actual cash value of your car. If that's the case, whatever car insurance payment you receive after an accident is likely to be less than the amount you paid for the extra coverage.
Do you want to cancel or reduce coverage for an older vehicle? Calculate how much your repair or replacement costs would be if you paid out of pocket. If the market value of your older car remains high, it may make sense to keep full coverage.
Cheap Car Insurance Companies and Their Rates
The average monthly vehicle insurance prices supplied by eight of the largest vehicle insurance companies are listed below.
- Liberty Mutual: $313
- Farmers: $282
- Allstate: $237
- Nationwide: $213
- Travelers: $179
- American Family: $171
- State Farm: $162.
- USAA: $121
According to SmartFinancial's market research, the average monthly vehicle insurance prices supplied by eight of the cheapest vehicle insurance companies are listed below.
- American National P&C: $51.544
- Concord Group: $68.98
- Countryway Insurance: $76.65
- North Carolina Farm Bureau: $86.42
- Bear River: $92.56
- Buckeye Insurance: $92.70
- Pekin Insurance: $96.75
- Virginia Farm Bureau: $96.85
Is It Better to Have a $500 or $1000 Deductible?
Determining how much of a deductible to settle on may be a challenging decision for many customers. One way to save money is to increase your deductible. Because the customer assumes a fraction of the overall cost of a claim, the larger the deductible, the cheaper the yearly or monthly premium may be.
Let's assume your car insurance policy has a $5,000 coverage line. Your insurance provider will cover you for $4,500 if you have a $500 deductible, whereas a $1,000 deductible implies your insurance company will only cover you for $4,000.
When you opt for a smaller deductible, the insurance company will raise your premium rates. Why? The car insurance company takes on increased financial risk when your deductible is low. They are responsible for paying the settlement and providing you with increased coverage in this situation.
Conversely, your car insurance rate will be lower if you select a higher deductible. Raising your deductible is only a good idea if you are a careful driver who seldom files claims or causes accidents.
Consider getting the lower deductible if you are a poor driver. If you get into an accident, it will prevent you from taking on an increased financial debt load.
When choosing between auto insurance deductibles, consider the following factors:
- Car's value
- Monthly expenses
- Reserve/savings Account
Tips to Improve Your Credit Score
As mentioned earlier, your credit score significantly impacts how much you pay for car insurance rates. Here are several tips you can follow to improve your credit score and decrease your premiums.
Request a free copy of your credit report, and if there are errors, dispute them right away.
Avoid maxing out your credit cards.
You should prioritize paying bills on time, avoiding opening new accounts unless required, and keeping credit card balances as low as possible — no more than 30% of maximum borrowing capacity.
Use low-interest credit cards.
To repair your credit, you should pay off your credit cards first, especially those with high-interest rates, to avoid paying interest.
Become an authorized user.
Ask whether the company can add you as an authorized user if you have a relative with a lengthy history of responsible credit card use and a high credit limit. If you have a short credit file, it is the ideal option. It gives you a longer credit history and lowers your credit usage.
Pay twice a month.
Rather than paying a single large payment at the end of the month, try making two smaller installments every two weeks. It might allow you to make a few more payments each year and avoid paying interest. Furthermore, making additional payments will help you pay down your principal debt faster, decreasing your account balances and credit usage ratio.
Your credit score plays a big part in your ability to lease a car, rent an apartment, get a mortgage, and qualify for cheaper insurance policies, among others. (Note: when it comes to purchasing life insurance, it is the one exception, a poor credit score has less of an impact on costs.)
Monthly vs Annually Car Insurance Premiums - Which One's Better?
Paying your insurance premium annually is usually the more cost-effective alternative option compared to making monthly payments.
Many companies may give you a discount if you pay in full since it saves them time and annual plans are great for individuals whose income varies throughout the year and who have trouble making monthly payments.
Therefore, if you frequently incur late penalties, paying your insurance payment once a year will save you money.
Providers offer a monthly payment plan if you can't afford to pay an entire year's insurance cost in a lump sum. Most insurers, however, impose an installment fee for this type of plan since processing 12 payments instead of just one requires extra effort on their part.
For some people, paying in monthly installments is a preferable alternative even if there is a monthly cost because it allows individuals to budget their money every month.
Should You Cancel Your Policy or Adjust It?
Although you have the option to change auto insurance carriers at any time, take a moment to consider whether canceling your vehicle insurance coverage is the correct option before going through with it. You will typically weigh your options if you've recently:
- Added another driver to the policy
- Got married
- Approached renewal date
You should also thoroughly research an insurer before switching to a new company. Don't shop just for cheap car insurance based on pricing.
Request recommendations from friends and family and check with your state insurance department to see whether they keep track of consumer complaints per firm.
Whether you decide to cancel or renew your auto insurance, remember that gaps in coverage may cause difficulties down the line. Why? Some insurance companies see lapses in coverage, even for a few days, as a red flag. They see you as more of a risk than other policyholders. It could result in higher premiums in the future.
Are you thinking about canceling your insurance policy? Give your agent a call first or use SmartFinancial's online tools to compare more than 200 carriers. By arming yourself with the best information, you can make the right decision for your situation.
Can You Drop Your Car Insurance at Any Time?
One advantage of switching auto insurance carriers is the possibility that you will save money on your rates.
The formulas used by insurers to establish auto insurance rates change periodically, so the insurance company that offered you the best deal two years ago might not be the most affordable option now.
As a result, most automobile insurance policies allow you to terminate your coverage at any time. You simply need to provide written notification with the effective cancelation date.
However, you must research your insurer's cancelation policy to understand if there are any costs associated. Otherwise, you risk incurring cancellation costs or forfeiting your right to a refund for any payments paid in advance.
Compare Auto Insurance Costs Before Buying a Car
It's never a bad idea to shop around for a better deal on your car insurance rates. There are several ways to obtain free automobile insurance quotes.
Reaching out to insurers one by one is one approach, but a more efficient method is to compare several auto insurance quotes at the same time. SmartFinancial could save you time and money by helping you compare side-by-side rates from its 200+ insurance company partners instantly. To get started, enter your zip code on this page.
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