Car insurance — it’s like throwing money into a black hole, isn’t it? Every month you watch hundreds of dollars slip out of your bank account, and for what? A promise that if something goes wrong, you’ll be protected. But the thing most people don’t realize is that you have way more control over your car insurance costs than you likely think.
The average American pays $1,424 per year for car insurance, but some pay a third of that average, while others pay nearly twice that amount. They are not lucky — they simply understand the system better than everybody else. These are not byzantine financial tricks or loopholes that only someone with a law degree could understand. They are simple tactics that anyone can employ to cut your insurance bills without skimping on coverage.
Ready to become one of the smart drivers who’ve been let in on the secret? Let’s get into the true little-known secrets that can save you big money that insurance companies don’t want you to know about.
Shop Like Your Wallet’s Depending on It (Because It Is)
Most folks stay with their first insurance company as if wed to it for life. Big mistake. Insurance rates fluctuate all the time, and what was an excellent deal three years ago may be highway robbery today.
Here’s your plan: Create a calendar reminder to shop around for new quotes every six months. Not every year, but every six months. Rates offered by insurance companies vary based on claims data, competition, and other factors. The company that was the cheapest in January may be the most expensive in July.
Consult at least three comparison websites, and don’t stop there. Call companies directly too. There are some insurers that have better rates if you speak with a real person as opposed to completing your information online. Progressive, GEICO, State Farm and Allstate are among those that frequently offer separate rates for online quoting and phone quoting.
Pro tip: Don’t simply compare the bottom-line price. Examine deductibles, coverage limits and what’s included. For example, you might see a policy that’s $50 a month less expensive than the one you currently have — but that has a $2,000 deductible instead of $500. It could end up costing you more over time.
Bundle Smart, Not Just Often
Bundling auto and home insurance gets all the attention, but most folks do it wrong. They take for granted that bundling will be the most cost-effective option — and that’s not always the case. Indeed, the “discount” you get for bundling can be so substantial that it makes the cost of buying those two policies together through one company even more expensive than the cost of purchasing separate policies through separate companies.
Here’s the intelligent way to do it: Get quotes from three companies for bundled insurance, but also get quotes for home insurance and equivalent quotes for auto insurance from different companies. Do the math. Now and then, you’ll save more by mixing and matching than you would by bundling.
But when it does save, it can save big. State Farm typically offers 25% discounts on bundled auto and home insurance to its customers. GEICO: Get up to 25% off by bundling multiple cars or adding renters insurance to your auto policy.
Aside from home insurance, here are other bundling opportunities to consider:
- Multiple vehicles on one policy
- Insuring teenage drivers rather than purchasing them individual policies
- Obtaining motorcycle or RV insurance in addition to an auto policy
Master the Art of Deductible Strategy
Your deductible isn’t just a number you pick out of a hat — it’s a powerful tool for controlling what you pay for insurance. Increase your deductible from $500 to $1,000, and you may knock 15-30 percent off your premium. Bump it up to $2,000, and some drivers get 40% off or more.
But here’s the catch: Increase your deductible only to the point that you could really afford the out-of-pocket costs. It won’t help to save $500 a year on premiums if you don’t have $2,000 to file a claim.
Establish a “deductible fund” in a dedicated savings account. Deposit the money you are saving on premiums into this account until you have enough saved to pay for your deductible. That way you can still protect yourself against large dollar amount accidents, but are self-insuring for smaller claims.
The Timing Secrets That Insurance Companies Won’t Admit
Insurance shopping timing matters more than you think. Insurance companies review data all the time, and increasingly change rates as they see patterns emerge. Here are the timing tricks that might save you money:
Don’t wait until you need it. If you’re shopping for insurance after an accident or ticket, you’ll pay much more. Desperate customers, in the eyes of insurance companies, are high-risk customers.
Avoid month-to-month payments. Paying monthly versus every six months can add 10-15% to your total cost. Insurers tack on processing fees for paying monthly, and they really add up.
Timing is key regarding when you begin the policy. For some plans, insurance companies offer you better rates for plans that begin on the first of the month. Others offer discounts for policies that start on certain days of the week.
Shop during off-peak times. Insurance agents are typically more likely to negotiate or throw in extra discounts when they’re not overwhelmed with customers. Instead of shopping on a weekend evening, try shopping on a Tuesday or Wednesday morning.
Discount Hunting Made Simple
There are dozens of discounts available. Some of them insurance companies don’t even promote. You have to ask. Here are the discounts people often overlook:
Driving-Based Discounts
- Good driver: 3-5 years without tickets, accidents or claims saves you 15-30%
- Low mileage discount: If you drive fewer than 12,000 miles a year? You could save 10-15%
- Defensive driving course discount: Complete an online one-day course and get up to 10% off for three years
Life Situation Discounts
- Good student discount: 10-25% off for students with B averages or better
- Military discount: 10-15% off for active duty and veterans
- Professional discount: Teachers, engineers, doctors, and some other professions can get a special group discount
- Alumni discount: Some insurers offer discounts for alumni of certain colleges
Car-Related Discounts
- Safety feature discount: If your car has anti-lock brakes, air bags or an anti-theft system, you may qualify for a premium decrease
- New car discount: Many insurers offer discounts for cars that are under three years old
- Hybrid/electric vehicle discount: Eco-friendly cars can save 5-10%
Technology That Pays You Back
Today insurers reward safe drivers with technology, but the driver has to opt in to enjoy the benefits. These applications may seem like Big Brother, but they can earn responsible drivers a reduction of 20-30% on their premiums.
Usage-based insurance programs monitor your driving through smartphone apps or plug-in devices. They monitor things like:
- Acceleration and hard braking speeds
- What time of day you drive
- How many miles you drive
- Whether you text while driving
Programs like Progressive’s Snapshot, State Farm’s Drive Safe & Save and Allstate’s Drivewise can offer substantial discounts for safe drivers. The trick is knowing what they are measuring and adjusting habits accordingly.
Pay-per-mile insurance is a good choice if you drive fewer than 10,000 miles annually. Companies such as Metromile charge a base rate and then a fee for each mile driven. If you work from home, live in a walkable city or are retired, it could reduce your insurance bill by as much as half.
The Credit Score Connection
Your credit rating can affect your car insurance rates in most states — but not as much as you might think. Drivers who have great credit are paying just $1,427 per year, on average, for full coverage, while drivers with poor credit are paying an average of $2,516 — a difference of over $1,000 for the same coverage.
Here’s what to do with this information:
- Review your credit score before you shop for insurance
- Correct any mistakes on your credit report
- If you have been able to improve your credit since you last shopped for insurance, call your insurer and ask for a re-rate
- Consider waiting until you’ve paid down debt or boosted your credit score to shop for insurance
In a handful of states (California, Hawaii, Massachusetts and Michigan), insurance companies aren’t allowed to use credit scores in pricing, but in the remaining 46 states, your credit score is a big part of what you pay.
Coverage Optimization Strategies
Not all coverage is created equal and insurance companies make their biggest margins on coverage you don’t need. Here’s how to cut your policy down to size:
Ditch Collision and Comprehensive for Older Cars
If your car is worth less than $3,000, you likely do not want to pay for collision and comprehensive coverage. The rule of thumb: if the value of your car is less than 10 times the premium on these coverages, drop them, and put the money you save into a fund to replace the car.
Increase Liability Limits (Yes, Really)
That may sound counterintuitive, but boosting your liability coverage from the state minimums to higher levels is frequently inexpensive. The bump from $25,000 to $100,000 in liability coverage may be only $50-100 a year, but getting it is much more useful.
Eliminate What Is Not Needed
The insurance industry loves add-on coverage that sounds like a good idea but rarely works out for the insured:
- Rental car coverage: This is unnecessary if you have alternatives or can get rental coverage through your credit card
- Roadside assistance: You may find that a AAA membership or program from your car’s manufacturer is less expensive
- Gap insurance: Necessary only if you have negative equity in your lease or loan (you owe more than the vehicle is worth)
Coverage Decision Guide
| Coverage Type | Keep or Drop? | Why |
|---|---|---|
| Liability | Always Keep | Required by law, protects your assets |
| Collision (new car) | Keep | Protects your investment |
| Collision (old car) | Consider Dropping | May cost more than car’s value |
| Comprehensive | Keep if financed | Required by lender, protects against theft/weather |
| Uninsured/Underinsured Motorist | Keep | Protects you from uninsured drivers |
| Rental Reimbursement | Usually Drop | Other options often cheaper |
| Roadside Assistance | Maybe Drop | AAA might be better value |
Location-Based Money Savers
Your insurance rates — and in some cases your ability to purchase insurance at all — will vary depending on both where you live and where you park your car. These location adjustments can help you lower your premiums:
- Garaging address: If you have two homes, your garaging address should be the one that has lower insurance rates (it must be accurate and legal)
- ZIP code shopping: A few miles can make all the difference in the world. Consider insurance prices in your decision when you’re house hunting
- Work address updates: If you began working from home, or if you changed jobs, update your insurance company. Rates can drop if you cut the miles you drive to work or work in a different neighborhood
Age and Life Stage Strategies
Insurance prices vary significantly depending on your age and life circumstances. Here’s how you can learn to work with these changes, instead of against them:
Young Drivers (16-25)
- Remain on parents’ policy as long as you can (it’s generally less expensive than having a separate policy)
- Pick vehicles that have high safety ratings and low theft rates
- Use good student discounts
- If you’re a safe driver, look into usage-based insurance
Middle-Aged Drivers (25-65)
- This is your best-rate period – optimize coverage
- Consider umbrella insurance if you have significant assets
- Bundle policies to maximize discounts
Senior Drivers (65+)
- Inquire about senior rates (which start at 50 with some carriers)
- Enroll in a defensive driving course for more savings
- If you drive less, you might also consider pay-per-mile insurance
Smart Car Choices to Help Lower Your Insurance Bills
What car you drive is a major factor in setting your insurance rate, but it’s not always obvious which cars cost more or less. Sports cars, naturally, cost more, as do cars that are stolen often or expensive to fix.
Before you purchase your next car, obtain insurance quotes for the models you are considering. You might find the differences surprising. A Subaru WRX might be twice as expensive to insure as a Honda Civic, even if the cars have similar purchase prices.
Least expensive cars to insure:
- Honda Accord, Civic, and CR-V
- Toyota Camry, Corolla, and RAV4
- Subaru Outback and Legacy
- Ford Escape and Fusion
Cars that are often pricey to insure:
- Luxury vehicles (BMW, Mercedes, Audi)
- Sports cars (Mustang, Camaro, Corvette)
- Large SUVs and trucks
- Frequently stolen models
Payment Method Optimization
How you handle payment affects how much you pay. Some payment methods are easier and cost less, and some are harder and more expensive. Insurance companies offer discounts for some and fees for others.
Best payment methods:
- Electronic funds transfer (EFT): Usually a 3-5% discount
- Pay in full upfront: No processing fees and sometimes additional discount
- Auto-pay: Lowers costs for insurers which are frequently passed on via discounts
Payment methods to avoid:
- Credit cards: Processing fees 2-3% common
- Monthly billing: Fees as high as $5-$15 a month can be added
- Pay-by-phone: Typically $5 to $10 per transaction
The Annual Review Strategy
Create a date with yourself every January for an annual insurance review session. During this review:
- Shop around with at least three competitors
- Review your coverage and make sure it still matches your needs
- Notify your insurance provider of any changes to life circumstances (marriage, new job, moved, etc.)
- Look for new discounts you may be eligible for
- Consider adjusting deductibles based on your current financial situation
This one-hour yearly ritual can save you hundreds of dollars a year, making it one of the highest-paid hours you’ll ever work.
Red Flags to Avoid
In your search for savings in insurance costs, beware of these common traps:
Companies with horrible customer service: If you have a fender bender and the process to file a claim is a traumatic experience, then saving $200 a year will feel like hell. Before switching, look at customer satisfaction ratings and complaint ratios.
Coverage gaps: Never let your coverage lapse, not even for a day. Drivers with coverage gaps get charged higher rates by insurance companies, which view this group as high risk.
Rates that sound too good to be true: If a company seems to be offering a drastically lower quote than the competition, be sure to read the fine print. They could be omitting normal coverage or have very high deductibles.
Minimum coverage only: Sure, meeting your state’s minimum insurance requirements seems like a money saver, but generally it’s a false economy. If you are in a severe accident, minimum coverage will not shield you from lawsuits.
Frequently Asked Questions
Q: How frequently should I shop for new car insurance? A: Every six months or any time there is a significant life change — you move, get married or buy a new car. Schedule calendar reminders to avoid forgetting.
Q: Will shopping for insurance damage my credit score? A: No; insurance quotes are “soft” credit inquiries and do not impact your credit score. Feel free to shop around.
Q: Is it worth hiring an insurance agent to help me find the right policy? A: It depends. Independent agents who work with several companies can save you time by comparing plans for you. Captive agents (those who offer policies for only one company) tend to be less helpful in finding the best rates, but can provide better customer service.
Q: Can I negotiate with insurance providers? A: Yes, but not like purchasing a car. Insurance companies have a bit of wiggle room, especially for long-time customers. Call and inquire about other discounts, or let them know about quotes from competitors to see if they can match or beat them.
Q: What is the most common mistake people make when it comes to car insurance? A: Staying with the same company for years without shopping around. There’s little reward for loyalty in the insurance business — companies often increase prices for long-term customers, even as they offer better rates to attract new ones.
Q: How much do these tactics actually save? A: The typical driver can save 20-40% on their insurance with this advice. On a $1,400 annual premium, that’s $280 to $560 in savings a year, or about $1,400 to $2,800 over five years.
Q: Are the privacy implications of usage-based insurance worth it? A: Safe drivers who don’t mind sharing their driving data can save 15-30% with usage-based insurance. If privacy is a concern, consider programs that rely on smartphone apps instead of plug-in devices — typically, they gather less detailed information.
Your Wallet Will Thank You
Car insurance doesn’t need to be a budget-buster. With these tactics, you can cut your premiums without giving up great coverage. The key is being proactive, rather than passive. Insurance companies rely on policyholders who automatically pay their bill and never shop for a better deal.
Begin with the easy wins: Increase your deductible, bundle policies if appropriate and inquire about discounts for which you’re already eligible. Then move on to the bigger strategies like shopping every six months and optimizing your coverage.
The money you save on car insurance stays with you, ready for you to use however you see fit. Whether that’s for a vacation, paying off debt or padding your emergency fund, every dollar you don’t spend on overpriced insurance is a dollar that goes toward making your life better.
The insurance industry makes billions in profits every year, much of it from customers who are paying too much because they don’t know any better. Now you know better. Use these tactics, and stop being among the customers subsidizing everyone else’s savings.
When that lower insurance bill hits your account, your future self will thank you every single time.
