Car insurance is a necessary expense, but that doesn’t mean you should pay more than you need to.
The average American spends over $1,500 a year on car insurance, therefore, it is important to find ways to reduce your premium, which leads to significant savings over time.
Here are five proven strategies to help you lower your car insurance costs, without sacrificing the protection you need.
1. Raise Your Deductible
The fastest way to reduce your car insurance premium, is to increase your deductible. This is the amount you pay out of pocket, before your insurance coverage kicks in after a claim.
How it works: Most policies offer deductible options ranging from $250 to $2,000 for collision and comprehensive insurance coverage. By raising your deductible from $500 to $1,000, you could save 15% to 30% on these portions of your premium. Jumping to a $2,000 deductible could save even more.
Is it right for you? This strategy makes sense if you have emergency savings to cover the higher deductible and you’re a safe driver who rarely files claims. Ask yourself: could you comfortably afford to pay $1,000 or $2,000 if you needed to file a claim? If yes, the premium savings over several years often outweigh the higher out-of-pocket cost in the event of an accident.
The math: If raising your deductible from $500 to $1,000 saves you $200 per year, you’ll recoup the additional $500 deductible cost in just two and a half years—even if you do have a claim. If you go claim-free for longer, the savings continue to add up.
Pro tip: Set aside the money you save on premiums into a dedicated emergency fund specifically for your deductible. This way, you’re building a safety net while enjoying lower monthly costs.
2. Bundle Your Policies
Insurance companies reward customer loyalty and the convenience of managing multiple policies under one roof by offering multi-policy discounts, commonly called bundling.
How it works: By purchasing your auto insurance and homeowners or renters insurance from the same company, you can typically save 15% to 25% on both policies. Some insurers also allow bundling with life insurance, umbrella policies, or other coverage types.
Real-world savings: If you’re paying $1,200 annually for auto insurance and $800 for homeowners insurance, a 20% bundling discount could save you $400 per year—that’s money that could go toward a vacation, retirement savings, or paying down debt.
Additional benefits: Beyond the cost savings, bundling simplifies your insurance management. You’ll have one point of contact for questions, a single billing date, and potentially smoother claims processing when multiple policies are involved.
What to watch for: While bundling usually saves money, don’t assume it’s always the best deal. Compare the bundled price against what you’d pay for separate policies from different companies. Sometimes specialized insurers offer such competitive rates that buying separately still comes out cheaper.
3. Take Advantage of Discounts
Insurance companies offer dozens of discounts, but many drivers miss out simply because they don’t know to ask. Being proactive about identifying, and claiming every discount you qualify for, can dramatically reduce your premium.
Common discounts to explore:
Safe driver discounts: Maintaining a clean driving record for three to five years can earn you substantial savings. Some insurers offer accident-forgiveness programs that prevent your first at-fault accident from increasing your rates.
Low mileage discounts: If you drive fewer than 10,000 to 12,000 miles per year, you may qualify for reduced rates. With more people working from home, this discount has become increasingly valuable. Some insurers now offer usage-based insurance programs that track your actual mileage through a mobile app or plug-in device.
Good student discounts: Full-time students under 25 who maintain a B average or better can often save 10% to 25%. You’ll typically need to provide report cards or transcripts as proof.
Vehicle safety discounts: Cars equipped with anti-lock brakes, airbags, anti-theft devices, automatic emergency braking, or other safety features often qualify for discounts. Newer vehicles with advanced driver-assistance systems may earn even greater savings.
Professional and affiliation discounts: Many insurers offer reduced rates to members of certain professions (teachers, engineers, scientists), alumni associations, professional organizations, or even customers of particular employers or credit unions.
Defensive driving course discounts: Completing an approved defensive driving or accident prevention course can earn you a discount, typically 5% to 10%, for three years. This is especially valuable for older drivers or those with a recent ticket.
Payment and policy discounts: Paying your premium in full upfront rather than monthly, setting up automatic payments, going paperless, or renewing your policy early can all trigger small but meaningful discounts.
Take action: Contact your insurance agent or log into your online account and specifically ask which discounts are available and which ones you’re currently receiving. You might be surprised by what you’re missing.
4. Adjust Your Coverage Regularly
Your insurance needs change as your life and vehicle circumstances evolve. What made sense when you bought your car may not be the best choice today, and adjusting your coverage accordingly can lead to significant savings.
Drop unnecessary coverage on older vehicles: If you’re driving an older car with a low market value, paying for comprehensive and collision coverage may not make financial sense. A general rule of thumb: if your car is worth less than 10 times your annual premium for these coverages, consider dropping them. For example, if comprehensive and collision cost you $500 per year but your car is only worth $3,000, you might be better off saving that money and self-insuring for vehicle damage.
Adjust liability limits thoughtfully: While you should never carry less than your state’s minimum requirements, you might be paying for higher limits than you need—or conversely, you might be underinsured. Review your assets and risk profile annually. If your circumstances have changed significantly, adjusting your coverage up or down could either save money or provide better protection.
Remove drivers who no longer use your vehicle: If an adult child has moved out and has their own policy, or if a listed driver no longer has access to your vehicles, removing them from your policy can reduce your premium, especially if they were a young or high-risk driver.
Reconsider add-ons: Rental car reimbursement, roadside assistance, and gap insurance are valuable for some drivers but unnecessary for others. If you have roadside assistance through an auto club or credit card, you might be paying twice for the same service. If you’ve paid off your car loan, you no longer need gap insurance.
Annual checkup: Set a reminder to review your policy every year. Your insurance company won’t necessarily alert you when coverage becomes unnecessary, so it’s up to you to identify opportunities to optimize your policy.
5. Compare Rates on CompareQ
Perhaps the single most effective way to save money on car insurance is also the simplest: compare quotes from multiple insurers. Insurance rates can vary by hundreds or even thousands of dollars for the same driver and vehicle, depending on each company’s unique rating formula and risk assessment. That is why CompareQ is the best place to start looking for car insurance.
Why rates vary so much: Different insurance companies weigh factors differently in their pricing algorithms. One company might penalize young drivers heavily while another focuses more on vehicle type. Some insurers offer better rates to drivers with excellent credit, while others place less emphasis on credit scores. One company might consider your neighborhood high-risk while another doesn’t.
How often to shop: Experts recommend comparing rates at least once every one to two years, or whenever you experience a major life change such as moving, getting married, adding a teenage driver, or purchasing a new vehicle. Even if you’re happy with your current insurer, market conditions and company strategies change constantly, and a competitor might now offer you a better deal.
The comparison process: Request quotes from at least three to five insurers to get a meaningful comparison. Make sure you’re comparing apples to apples—the same coverage limits, deductibles, and policy features across all quotes. Online comparison tools can streamline this process, allowing you to see multiple quotes in minutes rather than contacting each company individually.
Don’t overlook smaller or regional insurers: While national brands have name recognition, regional companies or smaller insurers often offer competitive rates and excellent service. Some insurers also specialize in certain demographics, such as military families or drivers with less-than-perfect records, and may offer better rates if you fit their target market.
Loyalty doesn’t always pay: Many drivers stick with the same insurance company for years out of habit or perceived loyalty benefits. However, insurance companies often reserve their best rates for new customers rather than longtime policyholders. Your loyalty might be costing you money.
What to tell your current insurer: If you find a better rate elsewhere, inform your current company before switching. They may be willing to match or beat the competitor’s price to retain your business. Even if they can’t match it completely, they might offer additional discounts or coverage enhancements that make staying worthwhile.
Combining Strategies for Maximum Savings
The real power of these money-saving strategies comes from combining multiple approaches. For instance, you might shop around for a new insurer, bundle your auto and home policies with them, increase your deductible, and claim every discount you qualify for. Together, these actions could cut your premium by 30% to 50% or more.
Consider this example: If you’re currently paying $1,800 annually for car insurance and you switch to a company offering a 15% better base rate, bundle for another 20% discount, raise your deductible for 20% savings on comprehensive and collision, and add good student and safe driver discounts worth another 15%, your total savings could exceed $700 per year.
A Final Word of Caution
While saving money on car insurance is important, never sacrifice adequate coverage just to get the lowest possible premium. The goal isn’t simply to find the cheapest policy—it’s to find the best value, meaning comprehensive protection at a fair price.
Make sure you understand what you’re buying, maintain sufficient liability limits to protect your assets. When choosing an insurance company, check their reviews online, and see that they have a good rating. The cheapest policy won’t seem like such a bargain if your claims are denied or it is difficult to get an answer from the insurance company.
By implementing these five strategies thoughtfully, you can significantly reduce your car insurance costs while maintaining the protection you and your family need on the road.