Thrifty Driver's Guide: 7 Ways to Reduce Your Auto Insurance Costs
Auto insurance is a necessary expense for every driver, but that doesn’t mean you have to settle for high premiums. Whether you're insuring a brand-new car or an older model, there are numerous ways to cut down on your auto insurance costs without sacrificing coverage.
By being a savvy consumer and understanding how insurance companies calculate premiums, you can take proactive steps to save money while still protecting yourself on the road.
This guide will walk you through nine effective strategies to reduce your auto insurance costs, helping you keep more money in your pocket where it belongs.
1. Shop Around and Compare Quotes
One of the simplest yet most effective ways to save on auto insurance is by shopping around. Insurance companies vary widely in how they calculate premiums, so it pays to get quotes from multiple providers before making a decision.
- Use Online Comparison Tools: Websites like NerdWallet, The Zebra, and Policygenius allow you to compare quotes from different insurers side by side. These tools are easy to use and can give you a clear picture of how much you could save by switching providers.
- Work with an Independent Agent: Independent insurance agents work with multiple carriers and can help you find the best deal based on your specific needs. They can also offer advice on coverage options and discounts you might not find on your own.
- Review Your Coverage Needs: When comparing quotes, make sure you’re looking at similar coverage levels. If one policy is significantly cheaper, check to see if it has lower coverage limits or higher deductibles that could cost you more in the long run.
- Don’t Be Afraid to Switch: Loyalty doesn’t always pay off when it comes to insurance. If you find a better rate with another company, don’t hesitate to make the switch—just be sure to cancel your old policy after the new one is in place to avoid a lapse in coverage.
Some insurance companies offer new policyholder discounts when you switch—keep an eye out for these deals when shopping for a new policy.
2. Take Advantage of Discounts
Insurance companies offer a wide range of discounts that can help lower your premium. These discounts vary by provider, so it’s important to ask about all available options when shopping for insurance.
Common Auto Insurance Discounts
- Safe Driver Discounts: If you have a clean driving record, many insurers will reward you with lower premiums. Some companies even offer discounts if you take a defensive driving course.
- Good Student Discounts: If you have a student driver on your policy, you could qualify for a discount if they maintain a high GPA. This is because good students are statistically less likely to be involved in accidents.
- Bundling Discounts: If you purchase multiple types of insurance from the same company—such as auto, home, and life insurance—you can often get a discount on all your policies.
- Low Mileage Discounts: If you drive less than the average number of miles per year, some insurers offer discounts. Be sure to ask if your provider offers a low mileage discount if you don’t drive much.
- Safety and Anti-Theft Discounts: Vehicles equipped with safety features like airbags, anti-lock brakes, and anti-theft devices can qualify for lower premiums. These features reduce the risk of injury and theft, which insurers like to see.
Thrifty Thinking: Don’t assume your insurance company will automatically apply all the discounts you’re eligible for—ask them! You might be surprised at the savings you can unlock just by mentioning your car’s safety features or your child’s good grades.
3. Consider Usage-Based Insurance
Usage-based insurance (UBI) is becoming increasingly popular as a way to save money, especially if you're a safe or low-mileage driver. These programs monitor your driving habits using a device installed in your vehicle or a mobile app, and your premium is adjusted based on your behavior.
Benefits of Usage-Based Insurance
- Personalized Premiums: If you’re a careful driver, you could see substantial savings on your premium. UBI rewards drivers who maintain safe driving habits, such as avoiding hard braking, speeding, or late-night driving.
- Pay-As-You-Drive: Some UBI programs charge you based on the miles you drive. If you don’t drive much, this could lead to significant savings compared to traditional insurance.
- Try It Out: Many insurance companies offer a trial period for their UBI programs. This allows you to see how much you could save before fully committing.
Letting your insurer track your driving might sound a bit invasive, but if you're a safe driver, it could save you up to 30% or more on your premiums.
4. Opt for Higher Deductibles
Your deductible is the amount you pay out of pocket before your insurance kicks in after an accident. Choosing a higher deductible can significantly lower your premium, but it’s important to weigh the potential savings against the risk.
Pros and Cons of Higher Deductibles
- Lower Premiums: By opting for a higher deductible, you can reduce your monthly or annual premium. This is a great option if you have a good driving record and are confident that you won’t need to file a claim frequently.
- Out-of-Pocket Costs: The downside of a higher deductible is that you’ll need to pay more out of pocket if you do have an accident. Make sure you have enough savings set aside to cover the deductible in case of an emergency.
- Customizable Deductibles: Some insurance companies offer flexible deductible options where you can adjust the amount based on your financial situation. This allows you to strike a balance between affordable premiums and manageable out-of-pocket costs.
5. Maintain a Good Credit Score
In many states, your credit score plays a significant role in determining your auto insurance premium. Insurance companies use credit scores as a predictor of risk, with higher scores often leading to lower premiums.
Tips for Improving Your Credit Score
- Pay Bills on Time: Consistently paying your bills on time is one of the most important factors in maintaining a good credit score. Set up automatic payments or reminders to avoid late payments.
- Keep Balances Low: Try to keep your credit card balances well below your credit limit. High balances can negatively impact your credit score, so aim to use no more than 30% of your available credit.
- Check Your Credit Report: Regularly review your credit report for errors or inaccuracies that could be dragging down your score. You’re entitled to a free credit report from each of the three major credit bureaus once a year.
- Limit New Credit Applications: Applying for multiple new credit accounts in a short period can lower your credit score. Only apply for new credit when necessary, and avoid opening multiple accounts at once.
6. Take a Defensive Driving Course
Taking a defensive driving course is a proactive way to lower your auto insurance premium while also improving your driving skills. Many insurance companies offer discounts to drivers who complete an accredited defensive driving course, which can help you save money and stay safe on the road.
Benefits of Defensive Driving Courses
- Insurance Discounts: Completing a defensive driving course can qualify you for a discount on your auto insurance premium. Check with your insurer to see if they offer this discount.
- Enhanced Driving Skills: Defensive driving courses teach you how to anticipate and respond to potential hazards on the road, helping you avoid accidents and traffic violations that could increase your insurance costs.
- Ticket Dismissal: In some states, completing a defensive driving course can also help you dismiss a traffic ticket or remove points from your driving record, further protecting you from higher insurance premiums.
"Completing a defensive driving course could earn you a discount on your car insurance, typically ranging from 5% to 20% off your premium." — Bankrate
6. Drive Safely and Avoid Accidents
This might seem like a no-brainer, but the best way to keep your insurance costs low is to avoid accidents and traffic violations. Safe driving habits not only protect you and others on the road but also help you maintain lower insurance premiums.
Safe Driving Tips
- Follow Traffic Laws: Obeying speed limits, traffic signals, and road signs can help you avoid tickets and accidents, both of which can increase your insurance costs.
- Stay Focused: Distracted driving is a leading cause of accidents. Avoid using your phone, eating, or engaging in other distractions while driving.
- Limit Night and Bad Weather Driving: Driving at night or in poor weather conditions increases the risk of accidents. If possible, try to avoid driving during these times or take extra precautions when you do.
7. Review and Adjust Your Coverage Regularly
Your insurance needs can change over time, so it’s important to regularly review your policy and make adjustments as necessary. This ensures you’re not overpaying for coverage you no longer need or missing out on potential savings.
When to Review Your Policy
- Annual Check-Up: Set a reminder to review your auto insurance policy once a year. During this review, check if your coverage levels still make sense for your current situation and if there are any new discounts you might qualify for.
- Life Changes: Major life events such as getting married, moving to a new area, or buying a new car can all affect your insurance needs. Notify your insurer of these changes to ensure your policy is up to date.
- Vehicle Depreciation: As your car ages, its value decreases, which means you might not need as much coverage as you once did. Consider dropping comprehensive or collision coverage if your car’s value has significantly depreciated.
- Usage Changes: If you’re driving less—perhaps because you’re working from home or have moved closer to work—let your insurer know. Reduced mileage can often lead to lower premiums.
Drive Smart, Save Big
Reducing your auto insurance costs doesn’t have to be complicated. By taking advantage of discounts, shopping around for the best rates, and maintaining safe driving habits, you can significantly lower your premiums while still enjoying comprehensive coverage.
Remember, the key to saving is being proactive—regularly review your policy, explore new ways to cut costs, and stay informed about the factors that influence your premium. With these strategies, you’ll be well on your way to becoming a thrifty driver who knows how to keep more money in the bank.
