How to save money on car insurance

If you've renewed your car insurance policy lately, you know how expensive car insurance has become. According to S&P Global, in 2023 each of the top 10 car insurers raised prices by double-digits, with some insurers increasing rates as much as 34% in one year. 

That trend continued into 2024, due to inflation, supply chain disruptions and labor shortages, which have driven up insurers’ costs. Today, the average premium for full coverage insurance is $1,897 per year.

However, there are ways to reduce your costs. Shop around for a cheaper car insurance rate, raise your deductible, bundle your auto and home insurance and more to lower car insurance premiums.

Key highlights

• The cost of car insurance increased by 14% from October 2023 to October 2024, based on the most recent data from the U.S. Bureau of Labor Statistics.
• Nearly half (49%) of drivers say they've actively shopped for car insurance, according to research and analysis firm J.D. Power.
• Rates are expected to increase through 2024.

Simple ways to save money on car insurance

Car insurance has gotten more expensive, and that trend is unlikely to change.

"We expect rates to slightly moderate in 2024, compared to the 20% average increases experienced in 2023, but double-digit increases will most likely be the norm in most markets across the U.S. this year," says Mark Friedlander, director of corporate communications with the Insurance Information Institute (Triple-I).

If your existing insurance policy is too expensive and you're trying to save on insurance premiums, these 10 tips can help slash your rate.

1. Shop around to find the best insurance deals

Premiums vary significantly between insurers for the same coverage. Switching to another auto insurer could reduce your premiums by hundreds of dollars each year without sacrificing coverage or increasing your deductible.

"Auto insurance is the most competitive insurance market in the U.S.," Friedlander says. "National and regional insurers are focused on growing market share and earning your business."

To demonstrate how much shopping around can help you save, we requested quotes from major insurers for full coverage policies with $100,000 of bodily injury coverage per person, $300,000 of bodily injury liability protection per incident and $100,000 of property damage coverage with $500 deductibles. Quotes were for drivers 40 years of age.

Rates vary by state, but we found that switching insurers could reduce your premiums by 50% or more. For example, the highest annual premium in Massachusetts was $4,092. By switching insurers and selecting the company with the lowest average premium, you could get a policy that costs just $528 per year — reducing your premiums by 87%.

The rates below were collected from auto insurance comparison site CarInsurance.com for single, 40-year-old male and female drivers of a 2023 Honda Accord LX with a good insurance score and no violations on their record for full coverage insurance policy with liability limits of 100/300/100 and a $500 comprehensive and collision deductible. 

2. Raise your deductible, lower your premium

A car insurance deductible is how much you must pay out of pocket for repairs before your insurer starts paying for the claim. Depending on your insurance company, deductibles can usually range up to $2,500.

Generally, your premiums are higher if you have a low deductible since your insurer has to start paying losses sooner. To save money on your premiums, you can increase your deductible.

For example, we requested quotes and adjusted our deductibles. By increasing our deductible from $500 to $1,000, we reduced our annual premiums by about $170.

3. Bundle to save: Combine policies to get discounts

Whether you own your home or rent, you may be eligible for a multi-policy discount by bundling your property insurance with your car insurance policy.

An insurance bundle is two or more lines of insurance bought through one insurance company. The most common bundle pairs home and auto insurance together for a discount on both policies.

Discounts vary by insurer and savings can range from 4% to 13%.

4. Tailor your coverage, trim your costs

You may be paying for protections that you don't need. Common add-ons include:

• Roadside assistance. Roadside assistance is an optional add-on with most policies. However, if you're a member of AAA or another service, you may not need additional roadside assistance from your insurer.
• Rental coverage. If you're in an accident and your car is being repaired, rental coverage helps offset the cost of a rental vehicle. But if you have a spare vehicle or can carpool with a friend or coworker, you may not need rental car coverage.
• Custom equipment coverage. Custom equipment insurance is an optional add-on for modifications you make to the car's performance or appearance, such as an after-market sound system or rims. If you no longer have those modifications or get a new car, you can save money by canceling this coverage.

5. Low mileage, low cost: Pay less if you drive less

The Federal Highway Administration reports that people drive an average of 13,476 miles annually.

However, if you’re a low-mileage driver — usually, companies define low-mileage drivers as those who drive fewer than 7,500 per year — you spend less time on the road, making you less likely to be involved in an accident. As a result, insurers may reward you with a low-mileage discount. Depending on the insurer, you could save between 5% and 15%.

To continue to benefit from this discount, your insurer will typically require you to submit verification of your mileage at each renewal.

6. Smart monitoring: Drive safely and save

Usage-based insurance (UBI), is increasingly popular, according to data analytics company LexisNexis. This option lets insurance companies track your driving habits and mileage with a telematics device or mobile app.

"The better one drives, the better their opportunity to save on auto insurance through UBI," says Stephen Crewdson, senior director of Global Business Intelligence for Insurance at J.D. Power. "Many UBI programs also offer coaching to the driver on how to improve their driving in order to receive a discount. So, even those who do not drive as safely today can save if they adjust their driving based on feedback from the UBI program."

Depending on the program, you could save up to 40% by enrolling in a telematics or UBI program. However, there are some downsides to UBI. 

"[It's] important to note some insurers could raise your rates if they detect poor driving habits through their telematics," Friedlander says.

7. Stay constant: Keep your insurance active

When you apply for insurance, insurers will review your policy history. In general, companies will charge you a higher rate if you don't have an existing policy when you apply.

You can save money by maintaining continuous coverage. And if you apply for a new policy early, you may even qualify for an early enrollment discount.

8. Go paperless and save by going digital

Most insurers will give you a modest discount if you opt for electronic or digital communications. Instead of receiving renewal notices and billing statements through the mail, you'll receive that information through your email or the insurer's online portal.

9. Unlock discounts: Explore all possible savings

Whether you're looking for information on how to save on your teenager's car insurance or simply seeking to save money on your own policy, an agent can find out if you qualify for any discount programs. If your insurer doesn’t use local agents, contact the customer service department to ask about additional discounts.

Commonly overlooked discounts include:

• Defensive driving. Depending on the insurer and state, you may be eligible for a discount if you complete an approved defensive or safe driving course.
• Good student. If you have a child in high school or college, they may be eligible for a good student discount by maintaining a "B" average or better.
• Multipolicy. Some insurers will give you a discount on your auto policy if you're a homeowner, even if you don't purchase homeowners insurance through that insurer.
• Customer loyalty. If you stick with one insurer for a longer period, the company may reward you with a loyalty discount.

10. Don't overpay: Reduce coverage on older cars

You may not need to maintain collision or comprehensive insurance if you have an older, high-mileage car. You may be able to purchase a policy with only liability coverage and handle any repairs on your own.

Can I negotiate car insurance premiums?

Insurance is a highly regulated industry, so your premiums aren't up for negotiation. However, it's still a good idea to contact your agent or a customer service representative and ask about ways to lower your premiums. You may be eligible for discounts you weren't aware of or may be able to adjust your coverage or increase your deductible to save money.

Life events that can affect your car insurance premiums

Events in your life can have a substantial impact on your premiums. Some common events that can increase your premiums include the following:

• You move to a new state or city. Car insurance premiums are partially based on your location. Congested areas, those with high levels of uninsured drivers and those with higher crime rates tend to be more expensive since you're more likely to be involved in an accident or be the victim of auto theft.
• You're at fault in an accident. If you're in an accident and found to be at fault, you could see a significant increase in your premiums.
• Your credit score decreases. In many states – California, Massachusetts and a few others being the exceptions – car insurance companies can take your credit score into consideration when setting rates. In general, drivers with poor credit will pay much more for car insurance than other drivers. If your credit score recently decreased because of missed payments, foreclosure or bankruptcy, you may find that your car insurance premiums will be much more expensive at renewal.
• You buy a new car. If you buy a new vehicle, your premiums will likely increase since the car has a higher value and will be more expensive to repair or replace.

Can you save on insurance by paying for car insurance annually rather than every six months?

If you're researching how to save money on your car insurance, one simple way to reduce your cost is to pay for your coverage upfront rather than in monthly or bi-annual installments. In fact, we found that Progressive, Liberty Mutual and others offer such discounts.

Bottom line

Although car insurance rates have increased over the past year, saving money on your policy is still possible. Learning how to save on car insurance by using the above tips could help you reduce your premiums.

Shop around with many carriers, ensure your coverage limits and deductibles are balanced with your budget and insurance needs, and consider UBI — whether you are already a safe driver or open to changing your driving habits based on UBI feedback, Crewdson says.

Resources & Methodology

Sources

1. S&P Global. "Largest US private auto insurers boost rates by double digits in 2023." Accessed August 2024.
2. Safeco Insurance. "Low mileage verification." Accessed August 2024.
3. American Family Insurance. "Safe driving program." Accessed August 2024.

Methodology

Editors collected rate information from auto insurance comparison site CarInsurance.com for single, 40-year-old male and female drivers of a 2023 Honda Accord LX with a good insurance score and no violations on their record for full coverage insurance policy with liability limits of 100/300/100 and a $500 comprehensive and collision deductible.

In addition, we also calculated rates for these hypothetical drivers, but with one or more of the following on their record: speeding ticket, at-fault accident, DUI/DWI, poor credit history, or a lapse in coverage.

We analyzed more than 53 million quotes, over 34,000 ZIP codes, and 170 insurance companies nationwide.

Note: 100/300/100 means up to $100,000 for the medical bills of those you injure, up to $300,000 per accident for bodily injury liability for all persons injured in one accident, and $100,000 to repair other drivers’ cars and property you damage.