- Since auto insurance rates vary significantly from one company to the next, the best way to save money is to decide on the coverage you need and then compare different auto insurance prices online.
- If you have a luxury car, electric vehicle or sports car, you may be paying more for auto insurance since these vehicles have a higher rate of losses, repairs and thefts.
- Insurance companies consider mileage when calculating the costs to insure your car. Consider taking public transportation, carpooling or working from home a few days each week to lower your auto insurance costs.
It’s not only costing more to fuel your car—the cost of insuring your car is also rising.
Last year, the national average car insurance cost rose to $1,529, a 3% jump from 2020, according to The Zebra’s 2022 State of Auto Insurance report.
Insurance companies say the reasons for the rise in auto insurance rates are varied. In March, the American Property Casualty Insurance Association (APCIA) released three reports detailing how insurers and policyholders are experiencing “strong upward pressure on insurance rates following high rates of inflation. They also attributed the rise in auto insurance rates to labor shortages, escalating costs for vehicle repairs and rental cars, and a sharp increase in car accidents caused by impaired driving, speeding, and a failure to wear seatbelts.
To save money on auto insurance, David Marlett, managing director of the Brantley Risk and Insurance Center at Appalachian State University in Boone, N.C., recommends consumers shop around to compare pricing and get auto insurance quotes from several companies.
“Although insurers offer a similar product, their premiums differ considerably and change over time,” Marlett says.
Despite auto insurance rates being costly, there are ways to save. Insurers base your individual rate on factors including the make and model of your vehicle, your driving history, where you live, and the specific insurance coverage you select. Read on to learn some cost-saving strategies:
Inside this article
Determine individual coverage needs
The cost of your auto insurance depends in part on the type of coverage you choose. A full coverage policy includes comprehensive and collision insurance, which will pay out in the event your vehicle is damaged. It makes sense to have full coverage if you own a new car, have an auto loan or lease, or can’t afford to replace your vehicle if it’s stolen or damaged in an accident.
Consider dropping full coverage insurance when the annual premium meets or exceeds 10% of your car’s market value.
Liability coverage pays for property damage and/or injuries to another driver in the event you cause an accident. Liability coverage is required whereas the Insurance Information Institute says that collision and comprehensive plans can be optional.
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Raise your deductible
By increasing the deductible on your auto insurance (the amount you pay out-of-pocket before the insurance company chips in to pay for repairs), you can obtain a lower insurance premium (the monthly or annual cost you pay for insurance).
As an example, the Insurance Information Institute says increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15% to 30%.
“If you’re willing to retain a portion of the potential losses in the event of an auto accident, increasing your deductible will lower your premium,” Marlett says.
However, it’s important to keep in mind that raising your deductible poses a risk.
“You need to be sure you have the financial ability to pay the deductible if you have a claim,” Marlett says.
Improve your credit score
A good credit score of roughly 700 or higher is one of many factors auto insurers use when calculating auto insurance premiums.
“It might seem strange, but nearly all insurers use credit, also called FICO scores, in their pricing model because it is a strong predictor of losses,” Marlett says. “Research has shown that people who maintain good credit typically have fewer insurance claims.”
To improve your credit score, pay down credit card debt and pay your bills on time with consistent payments. Allstate Insurance says many insurers use credit-based insurance scores to help determine risk when providing consumers with insurance quotes. (Except for Massachusetts, Hawaii, and California, where the practice has been banned).
Take good care of your vehicle
By parking your car in a garage and ensuring your vehicle has safety equipment such as anti-lock brakes and air bags, you can qualify for auto insurance discounts.
Also, some insurers offer discounts if your vehicle is equipped with anti-theft features such as tracking or recovery devices. Driving less also results in reduced insurance rates. Some insurance companies offer pay-per-mile auto insurance programs targeting low-mileage drivers. These plans charge a base rate and a variable cost-per-mile rate that changes monthly based on the number of miles driven.
Practice safe driving
Maintaining a safe driving record is one way to keep your auto insurance rates affordable. According to the Insurance Information Institute, the more traffic violations you have, the more likely you’ll see an increase in your insurance premiums.
“Avoid distracted driving situations such as texting and slow down,” Marlett says. “Rates for young males are especially high, but skyrocket following a moving violation or accident.”
The Zebra notes that incidents such as fleeing the scene of an accident can raise insurance rates as much as 82%. Driving under the influence of alcohol, speeding, following another car too closely, reckless driving and racing, can also raise insurance rates.
Some auto insurance companies offer save driver mobile apps that track your driving habits and can reduce costs. For example, with State Farm’s Drive Save and Safe app, customers can save up to 30% by practicing certain driving habits such as limiting excessive speed, and limiting driving at night. Progressive, Nationwide, and Geico also offer mobile savings apps.