12 Ways to Lower Your Car Insurance Bill Without Gutting Your Coverage
Two drivers with similar records can pay very different prices for the same coverage. Here is what insurers look at and the practical steps that can bring your premium down.
How car insurance pricing works
Insurers price policies by estimating how likely you are to file a claim and how expensive that claim might be. Each company builds its own formula, which is why the same driver can receive quotes that differ by hundreds or even thousands of dollars a year.
Common rating factors include your driving record, age, location, the vehicle you drive, how much you drive, the coverage and deductibles you choose and, in most states, credit-based insurance information. A few states restrict or ban some of these factors, so what applies to you depends on where you live.
Know what you are buying
| Coverage | What it does |
|---|---|
| Liability (bodily injury and property damage) | Pays for injuries and damage you cause to other people. Required in nearly every state, with minimum limits that vary. |
| Collision | Pays to repair or replace your car after a crash, regardless of fault, minus your deductible. |
| Comprehensive | Covers non-crash losses such as theft, fire, hail, falling trees and hitting an animal. |
| Uninsured / underinsured motorist | Protects you if the at-fault driver has no insurance or too little. |
| Medical payments / PIP | Helps with medical costs for you and your passengers. Rules differ widely by state. |
Collision and comprehensive are usually required by a lender if you have a car loan or lease, but optional on a car you own outright.
12 ways to lower your premium
1. Compare quotes from at least three to five insurers
This is the single most effective step. Because every insurer weighs risk differently, the cheapest company for your neighbor may not be the cheapest for you. Compare identical coverage limits and deductibles so the prices are meaningful.
2. Raise your deductible, carefully
A higher collision and comprehensive deductible lowers your premium, because you take on more of the small losses yourself. Only choose a deductible you could pay from savings tomorrow without borrowing.
3. Ask about every discount
Common ones include multi-policy (bundling home or renters insurance), multi-car, good driver, good student, low mileage, paid-in-full, paperless billing, anti-theft devices and affiliation discounts for certain employers or organizations. Discounts are rarely applied automatically.
4. Consider a usage-based program
Telematics programs track driving habits through an app or device, and safe drivers may earn a discount. Read the terms first: some programs can raise your rate for risky habits and share data with the insurer.
5. Review your annual mileage
If you now work from home or commute less, tell your insurer. Lower mileage can mean a lower rate, and an outdated estimate means you may be overpaying.
6. Drop coverage you no longer need on an old car
If your car is worth only a few thousand dollars, the premium for collision and comprehensive plus the deductible may approach the most you could ever collect. Do the math before you decide, and keep liability coverage.
7. Maintain continuous coverage
A lapse in coverage, even a short one, can lead to higher quotes later. If you are not driving for a while, ask about a storage or reduced coverage option rather than cancelling outright.
8. Keep your driving record clean
Accidents and moving violations often affect rates for three to five years, depending on the insurer and state. Defensive driving courses can reduce points or earn a discount in some states and with some insurers.
9. Check how your credit affects your quote
In most states insurers use a credit-based insurance score. Improving your credit over time may help, and our credit score guide shows how. California, Hawaii, Massachusetts and Michigan limit or prohibit its use, with Michigan’s rules having changed in recent years, so check your own state’s rules.
10. Choose your next car with insurance in mind
Repair costs, theft rates and safety records vary a lot by model. Before you buy, get insurance quotes for the cars you are considering.
11. Reevaluate after life events
Moving, marriage, a new job, adding a young driver or a child leaving for college can all change your rate. Ask your insurer to re-rate the policy after each one.
12. Shop again every year
Prices change, and new customer pricing is often better than renewal pricing. Set a yearly reminder a month before your renewal date so you have time to compare.
What not to cut
- Liability limits. State minimums are often far lower than the cost of a serious accident. If you cause a crash and the damages exceed your limit, you can be personally responsible for the difference. Many consumer groups suggest choosing limits well above the legal minimum if you can afford it.
- Uninsured / underinsured motorist coverage. A meaningful share of drivers are uninsured or carry very little coverage, and this protects you from their mistakes.
- Required coverage on a financed car. Dropping it can put you in breach of your loan agreement.
Cheaper is not always better. A low price from a company with poor claims service can cost more in the end. Before you buy, check the insurer’s complaint record with your state department of insurance and the NAIC consumer resources.
How to compare quotes fairly
- Decide on your coverage limits and deductibles first, then request quotes for those same numbers everywhere.
- Have your driver’s license numbers, vehicle identification numbers and your current policy’s declarations page ready.
- Get quotes directly from insurers, through independent agents who represent several companies, and through comparison sites. Each channel can surface different prices.
- Ask what the price is if you pay in full, use autopay, or bundle other policies.
- Do not cancel your old policy until the new one is active, so you never have a gap.
Frequently asked questions
Why did my premium go up when I had no accidents?
Rates reflect more than your own record. Repair costs, medical costs, severe weather and claim trends in your area all feed into pricing, so premiums can rise even for a spotless driver.
Will a claim always raise my rate?
Not always, but at-fault claims often do. Whether a not-at-fault claim or a comprehensive claim changes your rate depends on the insurer and state. It is worth asking before you file for a small loss.
How much liability coverage should I carry?
There is no single answer. It depends on your assets and income that a lawsuit could reach. An independent agent or fee-only financial planner can help you decide.
Is full coverage required?
“Full coverage” is an informal term, usually meaning liability plus collision and comprehensive. The law requires liability in most states. Your lender may require the rest.
Sources: National Association of Insurance Commissioners (NAIC) consumer guides; state department of insurance publications; Insurance Information Institute consumer resources.
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