Methods for Cutting the Cost of Car Insurance

You can cut car insurance costs by driving safely, improving your credit score and comparing quotes online. Compare online and save up to $859 a year.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • Car insurance is a necessity, but that doesn’t mean that paying for it has to be tough on your wallet
  • You can do certain little things that will help keep your costs down
  • Some things may decrease it immediately while others may take more time to affect the rates that you pay
  • If you are not satisfied with what you are paying for car insurance, you have options

Car insurance is one of the higher bills that households have every month, especially if there are multiple drivers in the family.

What are some ways to cut costs on car insurance? Some tips for reducing car insurance costs have to do with changing the policy, personal factors or vehicle factors.

Start your search for reduced car insurance rates by entering your ZIP code into the FREE quote box.

Evaluate Your Policy

One of the first things you should do when considering how to reduce your car insurance costs is to examine your current insurance policy.

Look at the types of coverage you have and evaluate if you still need to carry the same amount.

  • If you have a newer car and/or it is leased or financed, it is a good idea to keep full coverage on it. The lender may even require coverage such as comprehensive and collision until your financial obligation has been met
  • If your vehicle is fully paid off and it is an older model, it may be in your best interest to carry less coverage. Visit Kelley Blue Book and see what the current market value is of your vehicle compared your collision and comprehensive coverage

Evaluate the medical coverage that you carry on your policy. If you have great health insurance coverage, you may not need to carry additional coverage through your car insurance.

Determine whether you need roadside coverage, especially if you have the same coverage elsewhere, such as through AAA.

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Improve Your Driving Habits

One of the biggest ways to reduce your car insurance costs is through your driving habits.

If you have been in multiple accidents or you have speeding tickets and other traffic violations, your rates for car insurance will be much higher than they are for safe drivers.

Depending on the violations, most will be expunged from your record after three years.

Offenses that are more serious such as DUI convictions will stay on your record for a longer period of time such as 7 to 10 years.

After this time, you will most likely be starting from scratch and you should notice a decrease in your premium.

Some insurance companies will reward you for doing things such as taking a defensive driving class. Ask your agent about possible discounts.

Drive a Different Car

The type of car that you drive will affect your insurance rates.

If you currently drive a sports car or you have an expensive luxury vehicle, you are probably paying fairly high rates.

If you are in the market for a new vehicle and you would like to decrease your premium, you should shop for a vehicle that rates high safety-wise.

Insurance companies reward you with lower rates for driving a safe vehicle that has:

  • Multiple air bags
  • Anti-lock brakes
  • Traction systems

Purchasing a car that focuses on keeping accidents down and protecting passengers will do more than just reduce your car insurance rates.

Improve Your Credit Score

How well you handle your bills and finances will affect your car insurance rates.

If you are a teenager who hasn’t had the chance to build up credit or you are an adult who has a bad credit history, you will pay a higher premium than your peers with better credit.

Building up your credit is something that takes time, but it is worth it in the long run, and there are things you should start to do to start improving your credit score.

One is to pay your bills fully and on time. If you have credit card debt, you should focus on paying it down as quickly as possible, even if that means making sacrifices in other areas of your life.

You should also get a copy of your credit report on an annual basis to check for any errors that it may contain. offers credit education and tips that you can follow to start the process of improving your credit, such as maintaining low balances on credit cards and getting your free credit report once a year.

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Get Good Grades

If you are a student, you more than likely are paying more for car insurance than the majority of drivers.

The National Highway Traffic Safety Association reports that drivers between the ages of 15 and 20 are the highest risk drivers and have more fatal crashes compared to drivers of other ages.

Insurance companies have noticed a link between good students and good drivers.

As a result, student drivers who do well in school usually see a reduction in their car insurance rates. This reduction is usually seen from a discount that is offered by most insurance companies.

If you have a GPA of 3.0 or higher, speak with your insurance agent about lowering your insurance premium.

Drivers who are college graduates tend to pay less than drivers who have not attended or graduated from a college or university.

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Increase Your Deductible

When you check out your car insurance policy to determine whether you need to carry full coverage, look at your deductible amount for comprehensive and collision coverage. You’ll want to know, is it better to have a $500 deductible or $1,000?

The higher deductible you carry, the lower your car insurance rates will be.

Although your premiums may be lower, you need to choose a deductible that you can actually handle. If you are in an accident and don’t have enough money to pay for the deductible, then it is a waste.

You would do better to carry a lower deductible that you can afford and pay a little more every month.

Pay Annually

When it comes to paying for your car insurance premium, most insurance companies give multiple payment options to help you budget your money such as:

  • Annually
  • Semi-annually
  • Quarterly
  • Monthly

Many drivers choose to pay insurance premiums on a monthly basis because it is easier to budget.

For this convenience, most insurance companies will charge you more per payment. If you have enough money to pay it annually, however, you can often save 10 percent on your premium.

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Who has the cheapest car insurance?

Sometimes the best way to reduce your insurance costs is to shop around for a policy with a different insurance provider.

There are many companies that offer auto insurance and as a result, some will offer very competitive rates to earn your business.

If you are unhappy with the amount you are paying with your current company, it wouldn’t hurt to look around.

Do a little investigating of a new company so that you know you are making a quality choice.

Make sure that the company is licensed in your state to sell car insurance. Visit A.M. Best online and see what the financial picture of the company is.

Do a comparison search for car insurance rates on this site by placing your ZIP code into the FREE quote box!

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