How to Save on Car Insurance: Smart Ways to Lower Your Rate
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Auto insurance shouldn’t drain your bank account. Here’s how to save money while getting the coverage you need.
Car insurance costs $179 a month on average, according to NerdWallet’s rates analysis. But that doesn’t mean that you’ll pay this price.
Companies base your rate on a variety of factors from the kind of car you drive to how long you’ve been insured. By understanding what affects your auto insurance costs, you can get good coverage without breaking the bank.
1. Shop around
Although auto insurers use similar factors like age, driving history and location to calculate your car insurance costs, they weigh these factors differently. That’s why it’s important to compare rates.
To analyze the importance of shopping around, NerdWallet compared rates for 35-year-old drivers buying full coverage insurance from the largest insurers in the nation. We found that costs vary by hundreds of dollars a year. Note: Although it’s one of the largest insurers in the country, Liberty Mutual is not included in our analysis because it does not provide rate data.
In fact, nationwide, good drivers with good credit can save more than $207 a month, on average, by switching from the most to the least expensive insurer. And savings can be even bigger for drivers with a recent at-fault accident or poor credit — almost $214 and $153 a month on average, respectively.
But these rates are nationwide. Your rate will vary depending on your location. For instance, a company with the lowest rates in one state might not be the cheapest in another. And the cheapest company for a good driver with good credit might not be cheapest for someone with, say, a DUI or a recent accident.
To lower your car insurance rates, get quotes from several companies once a year. NerdWallet’s car insurance comparison tool can also help you find the best deal.
Why you can trust NerdWallet: Our writers and editors follow strict editorial guidelines to ensure fairness and accuracy in our writing and data analyses. You can trust the prices we show you because our data analysts take rigorous measures to eliminate outliers and inaccuracies in pricing data, which include rates from every locale in the country where coverage is offered and data is available. When comparing rates for different coverage amounts, ages and backgrounds, we change only one variable at a time, so you can easily see how each factor affects pricing. Read our methodology.
2. Take advantage of car insurance discounts
Every insurance company offers special ways to save on your car insurance premium. To make sure you’re getting all the discounts you’re entitled to, check out your insurer’s discounts page and ask your agent to review your possible savings.
Our car insurance discounts page gives more details on what insurers offer different discounts. But remember to compare quotes based on your own situation. Just because an insurer offers multiple discounts doesn’t mean it offers the lowest overall price.
3. Drive safely
Speeding tickets, accidents and other traffic violations drive up car insurance premiums. If you get a ticket, you may be offered the opportunity to go to traffic school to get it dismissed or reduce the number of violation points that go on your driving record. If you can keep the violation off your driving record, the time spent in class could lower your car insurance up to $546 per year on average, according to our analysis.
» MORE:Does a speeding ticket affect your insurance?
4. Drop car insurance you don’t need
If your car is a clunker, it might be time to drop collision and comprehensive insurance, which pay for damage to your vehicle. Collision insurance pays to repair damage to your car if it crashes into another vehicle or object, or flips over. Comprehensive insurance pays if your car is stolen or damaged by storms, vandalism or by hitting an animal such as a deer.
If your car is worth less than your deductible plus the amount you pay for annual coverage, then it’s time to drop them. Collision and comprehensive never pay out more than the car is worth.
Evaluate whether it’s worth paying for coverage that may reimburse you only a small amount if anything.
But if you drop collision and comprehensive, remember to set aside the money you would have otherwise spent. Put it in a fund for car repairs or a down payment on a newer car once your clunker conks out.
5. Drive a car that’s cheap to insure
Before you buy your next car, compare car insurance rates for the models you’re considering. The vehicle you drive affects your car insurance premium, particularly if you buy collision and comprehensive coverage. Safe and moderately priced vehicles such as small SUVs tend to be cheaper to insure than flashy and expensive cars.
6. Increase the deductible
You can save money on collision and comprehensive insurance by raising the deductible, the amount the insurance company doesn’t cover when paying for repairs. For example, if you have a $500 deductible and your repair bill is $2,000, the insurer will pay out $1,500 once you’ve paid the $500.
Savings vary by company, so compare quotes with different deductible levels before you decide.
7. Improve your credit
Your credit can be a big factor when car insurance companies calculate how much to charge. It can count even more than your driving record in some cases. But this isn't the case in California, Hawaii, Massachusetts and Michigan, however, where insurers aren’t allowed to consider credit when setting rates.
To build your credit, focus on these three steps:
Make all your loan and credit card payments on time.
Keep credit card balances well below your credit limits.
Open new credit accounts only when necessary. Applying for too many credit cards can hurt your score.
8. Don’t drive a lot? Consider usage-based insurance
If you don’t mind having your driving behavior tracked, consider usage-based or pay-per-mile insurance to lower car insurance costs. To participate, you use an app or install a small device in your car that transmits data to the insurance company.
Metromile, Allstate, Nationwide and Mile Auto all offer pay-per-mile insurance in certain states. With this coverage, you typically pay a base rate plus a per-mile rate. So if you don’t drive long distances or commute daily, it could be a good option.
Several other insurers, including State Farm, Progressive, Safeco and Travelers, offer usage-based insurance programs that track behaviors like speeding and hard braking. They offer discounts or reduced rates for safe driving.
It’s possible to get a discount just for signing up for some of these programs, so they might seem like a no-brainer. However, some insurers may increase your rates if you’re deemed an unsafe driver. Make sure to check what behaviors are tracked and how your rate is affected before enrolling.
What Is Full Coverage Insurance?
You may have heard the term “full coverage car insurance” while shopping for coverage. But while that sounds like a single type of insurance that covers you in every possible situation, the truth is “full coverage insurance” usually refers to a combination of separate coverage types.
What is full coverage insurance?
Full coverage insurance typically refers to an auto policy that combines liability insurance with comprehensive and collision insurance. This combination pays for damage to your car and also covers injuries or damage you cause to others.
Full coverage usually includes:
Liability insurance, which pays for other people’s medical bills and property damage from an accident you cause.
Collision insurance, which pays for damage to your own vehicle after an accident.
Comprehensive insurance, which pays for damage to your vehicle from circumstances outside your control, like natural disasters or theft.
Full coverage car insurance isn’t required by law. Most states require a minimal amount of liability insurance, but this only covers damage or injuries you cause to others, not your own injuries or car repairs. Full coverage offers extra financial protection after a crash beyond your state’s minimum requirements.
What does full coverage car insurance cover?
Full coverage insurance provides coverage for most situations, like damage to your car from a storm, an at-fault accident, hitting an animal or even vandalism. And if your car is stolen, your full coverage insurance will even pay out the current value of your car so you can afford to replace it.
Below are the coverage types you may get in a full coverage insurance policy and how they work.
You can think about full coverage car insurance like a knight’s suit of armor. You start with your state’s mandated car insurance requirements, just like a knight starts with a breastplate. But sometimes that minimum amount of protection isn’t enough. Opting into additional coverage types will give you financial protection in even more situations, just like how a knight with more armor pieces will have other parts of their body protected.
But full coverage auto insurance doesn’t cover everything. If you want extras like new-car replacement insurance, emergency roadside assistance or custom parts and equipment coverage, you may need to add them separately.
» MORE: Types of car insurance
How much is full coverage car insurance?
The national average for full coverage auto insurance is $2,148 per year, or about $179 a month, for a 35-year-old good driver with good credit, according to NerdWallet’s analysis. That’s more than double the price of minimum-required liability insurance, which is why it pays to shop around and compare quotes from multiple companies to find the cheapest rate.
Although Liberty Mutual is one of the largest insurers in the country, it is not included in our analysis because it does not provide rate data.
Who needs full coverage auto insurance?
Full coverage insurance may be a good match if you:
Drive a new or expensive car.
Have an auto loan or lease.
Regularly commute in heavy traffic.
Live in a place with extreme weather, high car theft rates or a high risk of animal collisions.
Can’t afford to repair or replace your car if it’s wrecked or stolen.
But full coverage may not make sense if you drive an older vehicle. Comprehensive and collision insurance will only reimburse you up to the value of your car at the time it’s damaged or stolen. And these types of coverage usually come with an insurance deductible, which is an amount you’re expected to pay out of pocket toward repair or replacement costs.
If your deductible is more than the value of your car, you may want to skip these coverage types. For example, let's say you have a car worth $1,500. You opted into comprehensive and collision insurance, which costs $600 per year with a $1,000 deductible.
If you get into a car accident and total your car, the most you’ll get from your insurer is a $500 check, which is your car's value minus your deductible. In this case, you're left with $500, which is $100 less than what you paid for the coverage.
How to save on full coverage car insurance
Shop around.It’s important to shop around if you want to find cheap auto insurance. Compare rates with at least three companies to find the cheapest rate for you.
» MORE:Car insurance quotes: What you need to know
Look for discounts. There are car insurance discounts for everything from getting good grades to owning a new car. Call your agent to confirm what’s offered to maximize your savings.
Consider increasing your deductible. One way to lower your car insurance bill is by raising the deductible, which is what you’re on the hook for before insurance pays out. Doing this will lower the overall cost of your policy, although savings vary by company.
Avoid traffic infractions. Speeding tickets, accidents and DUIs can increase your car insurance rates drastically, even after one incident. These infractions can stay on your record for three to five years, so make sure to drive cautiously if you want the cheapest rates.
Work on your credit. Although it isn’t always easy to build your credit, it can impact your auto insurance bill. Our analysis of the average cost of car insurance found having poor credit can increase your rates more than a recent DUI for some drivers. There are exceptions to this, however: California, Hawaii, Massachusetts and Michigan don’t allow insurers to use credit when determining car insurance rates.
How much coverage do you need?
Most car insurance companies offer different policies for different types of drivers. For a baseline, you want a policy that includes bodily injury liability protection and property damage protection. But you may add other coverage types such as personal injury protection, uninsured motorist coverage or collision coverage. Some auto insurance carriers offer comprehensive coverage, which insures your vehicle from theft or damage caused by non-driving incidents such as a fire.
“Having adequate auto insurance coverage is both smart and prudent to ensure you and your family are financially protected from a catastrophic loss,” said Mark Friedlander, director of corporate communications at the Insurance Information Institute. “Comparison shopping when seeking insurance coverage is time well spent as premiums could vary by hundreds of dollars between carriers depending on numerous factors.”
In addition to choosing certain coverage types, you may be able to adjust your deductible -- the amount you pay for a loss before insurance kicks in. If you want a lower monthly premium, you can elect to have a higher deductible. Before you go that route, however, make sure you can cover a significant loss.
How to sign up for auto insurance
Signing up for car insurance is simple. Here are the major steps:
Gather your personal information. You’ll may have to provide a lot of personal information including your name, driver’s license number, date of birth, Social Security number, type of vehicle, VIN and bank account number.
Determine your coverage needs. You’ll be asked to select what coverage types and how much coverage you’d like. You may want to work with an insurance agent on this portion.
Apply online, in person or over the phone. Applying online may be the easiest option, but an insurance agent can walk you through the process in person or over the phone.
Submit your application and pay your premium. Once you’ve provided all the required information, you can pay your premium each month or via automatic withdrawal.
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