Although buying a car is a major expense for most people, so is owning one. There's getting gas, paying for maintenance, and covering your monthly loan amount. On top of that, there’s also auto insurance. Although rates vary significantly from state to state, the average annual outlay for car insurance in 2019 was nearly $1,500.
Since that’s an average, it includes the costs for people who haven’t followed any of our money-saving tips. If you pay attention to the advice below, you’ve got a good chance of paying less when it comes to auto insurance.
Smokey Robinson’s mom had the right idea when she said you better shop around. Individual insurance companies all have their own unique ways of coming up with policies, so even if you’re asking for rates on the same car, different companies will usually end up quoting you noticeably different costs. Rates do not necessarily stay the same year after year, either. With that in mind, you can maximize savings by getting updated insurance quotes every year.
You should also explore whether you might qualify for insurance from a specialized carrier. For example, the USAA is dedicated to providing insurance coverage for members of the U.S. military, veterans, and their families. Belong to a credit union? Many of those provide third-party financial services that include discounted auto insurance for members. The rates from these kinds of sources aren’t always lower than from mass-market insurers, but they’re certainly worth comparing.
Something else you may qualify for is an insurance discount. One common way to get a lower price is by combining all of your policies—like life insurance, homeowner’s or renter’s insurance, etc.—with the same company. Other popular discounts will save you money for having good grades, a good credit score, and/or a good driving record. Being a loyal customer over the years can help as well. Companies will also offer savings if you belong to a specific group, whether it’s the United States Chess Federation or your college’s alumni association.
Once a rate has been established, you might be able to reduce it further depending on your payment schedule. Quite a few insurers will lower your payment if you write a check twice a year instead of once a month.
Rather than offering a flat rate, some companies—such as Allstate, Metromile, and Nationwide—will let you pay for auto insurance based on how far you drive your vehicle. This kind of coverage isn’t available in every state, and it does require that you plug a tracking device into your car so the company can monitor your mileage. It can be a short path to lower insurance rates, especially for low-mileage drivers.
Insurance companies like Nationwide and Progressive can take the same approach to the next level, too. They’ll send you plug-in devices that not only monitor your driving distance but also analyze your driving habits. Your rates are then based on that data. Nationwide claims discounts of up to 40 percent with its program, while Progressive reports that its plan saves the average customer $130.
You wouldn’t be happy if someone stole your car for a joy ride, and having to pay for any damages is like adding insult to injury. Well, most insurance companies feel the same way. This is why plenty of discounts are available for vehicles with the right anti-theft features—including some equipment, like vehicle-tracking technology, that you can get directly from the automaker.
Similarly, insurers have begun decreasing rates for vehicles with the industry’s cutting-edge driver-assistance features. Be sure to let your agent know if your vehicle is so equipped, however, as that may not be obvious from other info you provide about your car.
A logical way to lower the amount you pay for insurance is to lower the amount the insurance company pays out for your possible claims. You have two basic options here: First, if you drive an older vehicle, you can reduce your coverage to reflect an age-appropriate value. This is particularly important because the average age of a vehicle being driven today is approaching 12 years. Since a teenage car is usually worth a lot less than a brand-new model, you probably don’t need the same amount of coverage on the former as you do the latter.
Increasing your deductible can boost your savings, yet it comes with a bit of a risk. Remember, the higher the deductible, the more you pay out of pocket before the insurance company gets involved. It may not be worth the savings to raise your deductible from $250 to $2,500, for instance, if you don’t have the extra $2,250 in the bank to shell out in case of an accident.
In a limited number of states, insurance companies such as Geico will reduce your rates if you complete a certified defensive-driving course. Which only makes sense from a savings standpoint if the cost of the class is lower than the resulting discount.