Owning your first car is an important milestone in life. Even if you’re onto owning another car, it’s still an exciting time when you drive around in something new.
When it comes down to it, cars aren’t just a sentimental item — they’re fundamental for everyday life. Approximately three quarters of Americans drive to work and nine percent carpool.
Using the car to go to work puts you on the hook for the expenses of getting there, the car, gas, and insurance. And finding coverage isn’t getting any cheaper.
Just because you need insurance doesn’t mean you have to settle for just any rate. You shouldn’t have to break the bank to pay your premium. You can still get the coverage you want at a more affordable price.
There are still a few tactics you can use to make sure your premium is as low as it can be.
Here’s how to save money on car insurance.
How to save money on car insurance
Increase your deductible
Your deductible is the amount you pay when making a claim. Let’s say you opted for a $500 deductible and you make a claim for $2,000. Your insurer will pay $1,500 while you’re responsible for $500.
There’s actually a direct relationship between high premiums and a lower deductible. This makes it a very simple way to lower your car insurance costs.
But don’t be so quick to raise that amount to save money. Make sure you have the funds to pay the deductible should you have an accident and want to file a claim.
Change your payment plan
What’s your payment plan like for car insurance?
The insurance company will often give you a discount if you pay your premiums annually instead of monthly.
Reconsider your coverage
If you own an older car, it might make more financial sense for you to drop full coverage and only have liability coverage.
To understand if this right for you, figure out how much you would get from the insurance company if your car was severely damaged.
For example, if the annual cost of full coverage insurance is more than 10 percent of what you’d receive in a payout then it might be worth it for you to drop full coverage.
Ask about discounts
There are a wide range of discounts offered by insurance companies.
Depending on the insurance company, your grades could save you some money on car insurance with the good student discount. A “good student” is open to interpretation and each insurer has different requirements. It could mean having an average of B or higher, being on the dean’s list or honor roll, or being in the top 20 percent of your class. To qualify, you would need to submit your transcript for the insurance company to verify your grades.
If you use your car sparingly, you could be eligible for the low mileage discount. A low-mileage driver is typically defined as someone who drives anywhere between 0 and 7,500 miles per year. This is significantly less than the US average annual mileage of 12,000.
Here are some other discounts you could be eligible for:
- Affiliation with a school, employer, or with the military
- Are a senior
- Purchase a multi-car policy
- Opt for auto-pay or paperless billing
- Have anti-lock brakes or anti-theft features on your car
- Buy a green car or hybrid
A green car or hybrid gets you a discount, but if you don’t drive either of those, you can still see how your car affects your insurance rate. Cover’s car insurance calculator gives a rating out of five based on how it impacts your premium.
Work on your credit score
By no means is this an overnight solution, but being aware of your credit score and actively working to improve it can help you save on car insurance in the long run.
Drivers with a low credit score can end up paying more than double what drivers with a good credit score do.
Take a driving course
There’s potential for you to lower your premiums by brushing up on your driving skills by taking a class. Usually if you’re 21 years old and under, you can take a driver training class to get a discount on your rate.
You could also take a defensive driving course. These classes teach you techniques that can prevent accidents or help you to react quickly and correctly to an oncoming hazard. Depending on the insurance company, they sometimes offer a discount on the course itself.
Maintain continuous coverage
Generally, insurers charge higher rates if you have gaps in your insurance history.
It’s a good idea just to maintain continuous insurance coverage to prevent higher rates in the future.
Bundle your insurance
Depending on the company, bundling can give you a discount anywhere from 5 to 25 percent on each policy. If you’re bundling auto insurance with homeowners insurance, the discount tends to be a bit better. This is because your home’s value is likely to be higher than your car.
If your home and auto insurance are bundled, you might see a discount of 10 percent on your car insurance and 15 percent on your homeowners policy.
The problem with bundling insurance is it sometimes causes a “set it and forget it” mentality.
Yes, you could be getting a discount by getting different types of insurance from the same company, but that could come at a cost. You’re not always rewarded by staying with the same company for years on end.
The best way to know if you’re getting the best rate possible is to check out competitors’ rates and get quotes from multiple companies. It’s best to shop around every year before your renewal date so you’re not overpaying for car insurance.
At Cover, we work with over 30 carriers to get you a quote that’s the best rate on the market for the coverage you want.
What’s the average cost of insurance?
It’s natural for us to want to compare ourselves to everyone else. It’s no different for car insurance. We want to see if we’re overpaying compared to friends, family, and the rest of the country.
According to Zebra, the average cost for car insurance is $1,426 per year, $713 per six-month policy, or $118.63 per month.
But don’t put too much stock in this number when you’re trying to figure out if you’re overpaying for insurance. Insurance rates are dependant on a number of different factors.
Average car insurance rates are usually based on a quote for a driver who might have very little in common with your own coverage needs.
What affects your car insurance rate?
The amount you pay in premium is related to your risk factors as a driver.
Your age, gender, occupation, location, driving record, and type of vehicle you drive is taken into consideration when an insurance company gives you a quote.
So while you could be a safe driver, you could be quoted a higher rate due to your age, which you can’t change.
But remember — that doesn’t mean you’re stuck with the rate you have or the one you’ve been quoted by an insurance company.