How to lower your car insurance premium

In a nutshell

According to an analysis by Forbes Advisor using data from Quadrant Information Services, the U.S. average annual premium for full coverage car insurance — including liability, comprehensive and collision coverages — is $2,150 per year!

• From December 2022 to December 2023, car insurance costs rose a staggering 20% according to the Bureau of Labor Statistics.
• In 2024, with core inflation still driving up insurance costs, many of us are particularly keen on finding ways to save.
• There are many things you can do to bring down the cost of your car insurance. These involve everything from a simple phone call to your insurance company or agent to longer-term strategies that’ll lower your “risk” in the insurer’s eyes and thus make you cheaper to insure.

Let's face it. No one wants to pay more than they need to for car insurance. Let's look at some ways to lower your car insurance premium.

Shop around

Savvy insurance shoppers know that premiums vary by hundreds of dollars between companies. For example, Forbes found a difference of $1,821 between the cheapest and most expensive of 14 major insurance companies for a full coverage, 12-month car insurance policy. So shop around to be sure you have the best deal.

There are a couple of efficient ways to do this.

• You can use an insurance comparison shopping service such as QuoteWizard or Smart Financial. These and similar sites can give you quotes from multiple insurance companies. Once you’ve found a price that works for you, you’ll link directly to that insurance company’s website to complete the purchase.
• You can also consider contacting an independent insurance agent or broker. These are qualified insurance professionals who offer policies from multiple insurance companies. They can check with those companies to find a policy that meets your coverage needs at the lowest cost. Simply put, an agent or broker does the legwork for you. You just enjoy the savings.

Even if you’re satisfied with your premium, consider shopping around at least every couple of years. Not only do premiums vary between insurance companies, but they tend to change over time.

Think outside the box of national insurers

Five companies — State Farm, Allstate, Progressive, Geico, USAA and a few others — own more than 61% of the U.S. auto insurance market. And they spend billions in advertising to get your attention. Yet there are more than 8,000 auto insurers across the country. That means there are a lot of insurance companies you rarely hear about.

Many of these smaller companies operate regionally or even in single states. Some might offer lower rates than the “big guys.” So when shopping around for insurance, be sure to check with some of the companies that aren’t inundating you with advertising.

Military? Check with USAA

While we don't necessarily favor one company over another, we recommend that those affiliated with the U.S. military check with USAA.

USAA offered the cheapest car insurance rates in a recent study. They also tend to receive high ratings from J.D. Power for their claims and customer service. Membership is available exclusively to active, guard, reserve, and veterans of the U.S. military (thank you for your service!), their spouses and their children.

Bundle your home and car insurance policies

Insurance companies love it when customers bundle their home, condo, or renters policy with their car policy. These customers tend to keep their policies longer and thus help the company be more profitable.

For that reason, insurance companies often give generous discounts for bundling. If you have multiple policies spread across different companies, do a few bundled quotes to see how much you can save.

Bundle your cars

For much the same reason that insurance companies like bundled policies, they also like car insurance policies with multiple cars. And they give generous "multi-car" discounts. So if you have multiple vehicles in your household on separate policies, try combining them on a single policy and see how much you can save.

Ask about other discounts

Most major insurance companies offer a wide range of discounts — some are even a bit surprising. The problem is that they don’t always apply discounts automatically when you qualify. Whether you’re getting a car insurance quote or have an existing policy, ask your insurer about discounts that may apply to you. Typical car insurance discounts include the following:

• Multi-policy.
• Multi-car.
• Paying the premium in full or having payments sent to the company through auto withdrawal.
• “Paperless” policy (you access all your documentation online).
• Getting a quote well before the policy goes into effect.
• Good student (usually requires a B average).
• Student away at college.
• Safe driver (violation-free driving record).
• Accident-free driving record.
• Defensive driving (completed an accredited course).
• Antitheft features on the car.
• Safety features on the car.
• Memberships in particular business and professional organizations or collegiate affiliations.
• Homeownership.
• Military and federal employees.
• Senior/mature driver.

Try usage-based insurance or pay-per-mile insurance

A relatively new trend in car insurance, usage-based and pay-per-mile programs base your car insurance premium on how and how much you drive your car.

These plans typically require you to transmit driving data to the insurance company. This is either through a device you plug into your car’s OBD port (under the dash) or through an app on your phone. The insurer then uses that data, along with traditional variables such as your driving record and year, make and model of your car, to provide a more accurate rate.

This approach is not for everybody. But if you drive fewer miles than the average, drive safely and don’t mind transmitting your driving data, you might be able to save money on your car insurance. Progressive, one of the pioneers of the usage-based insurance trend, claims that drivers who save money with its Snapshot program save an average of $156 per year.

Consider raising your deductibles

If your policy includes comprehensive and collision coverage, consider raising your deductible.

This deductible is an amount of money the insurance company will subtract from the cost to repair or replace your car if you file a claim. Think of it as your “share” of the repair or replacement costs.

The higher your deductible, the less you pay in premium. But remember that there's a trade-off in that you'll pay a more significant share when you have a covered car repair or replacement.

Audit your policy to see if there are coverages you can drop

Maybe you still carry comprehensive and collision on your 2013 Nissan Sentra. Perhaps gap insurance still lingers on your policy, even though you paid off your car loan last year. Or perhaps you’re now doubling up on roadside assistance coverage since joining AAA.

You owe it to yourself to do a little “audit” of your policy to see if there are any coverages you can simply drop to lower your premium. An insurance agent can help you decide what you do and don’t still need.

Improve your use of credit

What does your credit use have to do with what you pay for car insurance? Believe it or not, plenty. Many major insurers pull your credit information when calculating your premium. They cite research done showing that people who use credit responsibly (for example, good bill-paying habits) tend to get into fewer accidents and thus are less risky to insure. This lower risk means the insurance company can charge lower premiums.

Such use of credit is not without some controversy, even within the insurance industry itself. Some state laws have actually banned the practice. But if you’re in a state where credit use is allowed, you owe it to yourself to check your credit report, correct any inaccuracies and do your best to improve your credit score. It may take some time, but it could help you save on car insurance in the long run.

Drive safely

Your driving record is one of the most important factors that insurance companies consider when calculating your premium. Multiple violations resulting in points on your driver’s license can result in the insurance company deeming you to be riskier to insure. That’ll translate to a higher premium. It could even lead to the insurer canceling your policy!

There are a lot of distractions these days, both inside and outside of the car. According to AAA, using a smartphone can create a "hangover effect" that keeps you distracted for up to 27 seconds after you put down the device. So be sure to stay focused on the road to keep yourself, your passengers and your fellow drivers safe.

Check insurance rates when car shopping

It can be easy to fixate on the price sticker when you’re thinking about what you’re going to pay for a new car. But smart shoppers know to consider the total cost of owning a vehicle. This should always include the cost of insurance.

When shopping for a car — whether new or used — take a few minutes to do an insurance quote on the vehicle (or vehicles) you're considering. You might find that even similar models have vastly different insurance costs.

The website Edmunds.com has a helpful tool to help you calculate the cost of owning a car. It incorporates not only insurance, but maintenance, fuel and more.

Help your teen driver save

If you have one in the household, you might realize that a teen driver added to your policy can really bump up your insurance premium. Insurance companies know that teens are riskier drivers (they have the data to back it up), and they charge accordingly.

But all is not lost. Here are a few tips you can follow if you have a teen behind the wheel.

• Add the teen driver to the parents’ policy. This is typically cheaper than having the teen get their own policy.
• Ask about and take advantage of insurance discounts for taking a safe driving course, being a good student, or driving fewer miles than average.
• Consider the car. A standard sedan with modern safety features will likely cost less to insure with a teen on the policy than a Mustang GT (even though the teen might prefer the Mustang).
• Try usage-based insurance. As discussed above, usage-based insurance programs reward safe driving with lower premiums. Some even let parents monitor their teen's driving habits.

Never drive without insurance

As tempting as it may seem, driving without insurance is a bad idea that can cost you dearly in the long run. There are multiple reasons why.

First, it’s against the law, and there’s always a possibility you’ll get caught. Laws vary by state but typically include steep fines, license suspension, vehicle impoundment and jail time for repeat offenders. Most states also require filing an SR-22 before you can get your license back. An SR-22 is a document that your insurance company sends to the state to prove that you are, indeed, insured. Not only is there a fee for the SR-22 filing, but the insurance company will deem it a reason to increase your premium.

Second, you’ll be creating an even greater financial vulnerability. If you’re at fault in a car accident, your financial liability could reach tens of thousands of dollars — even more, if there are injuries. A court could come after any assets you have, including your home and savings. It could even garnish your future wages to help compensate the other parties.

Finally, insurers view drivers with a lapse in coverage as riskier to insure. So when you do get a new policy, you’ll likely pay more for it.

The AP Buyline roundup: Car insurance is a necessary expense but one you can control

Car insurance is a costly, though necessary, expense. But what you pay is not entirely out of your control. Try some of these tips and see if you can lower your car insurance premium.