Insurance » Car Insurance guides » 10 Great Ways to Cut Auto Insurance Costs
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10 Great Ways to Cut Auto Insurance Costs

Different companies have different policies, but there are some things that you can do to make sure you’re getting what you need and not paying a fortune.
Author: Russell White
Russell White

Writer, Contributor


As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO


Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.
Author: Russell White
Russell White

Writer, Contributor


As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO


Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

We earn a commission from our partner links on this page. It doesn't affect the integrity of our unbiased, independent editorial staff. Transparency is a core value for us, read our advertiser disclosure and how we make money.

Table Of Content

When it comes to handling your car insurance it can seem a bit overwhelming. But if you don’t know what you’re doing you could end up with some serious problems. That’s because the wrong car insurance can cost you a fortune.

Your home state can have a significant impact on your car insurance rates. This can be attributed to high density populations, higher numbers of uninsured drivers, the costs of lawsuits and even unique insurance schemes.

In this chart created with data from The Zebra shows the ten most expensive states for car insurance. It shows Michigan continues to have the highest average annual premiums. The average cost of insurance is significantly more in Michigan compared to the second most expensive state, Louisiana.

10 Most Expensive States for Car Insurance in 2020

Here are 10 tips that can save you money when you buy car insurance:

1. Shop Around

One of the first things you need to do in order to save money when you’re buying car insurance is to shop around.

Don’t just get a quote from one company and assume that’s the best you’re going to get. Instead, look at several different insurance companies and get a quote from each.

You may have a preference for which insurance company you think you want to work with because of commercials that you’ve seen. You may have seen several commercials that claim they offer the lowest rate. In fact, insurance companies go to a lot of trouble to convince you that the rates they’re offering are the lowest. But the truth is that different people are going to pay different rates for car insurance. Even with the same company and the same policy it could cost something different. That means there’s no one company that’s lowest for everyone.

One problem you could run into when you’re trying to shop around, however, is figuring out how to compare the different policies that are available. You want to make sure that you’re looking at the same coverage, because not every policy is going to be the same. Just because one looks like a better deal doesn’t mean that it actually is.

One way that you can improve your results and cut down on the amount of time that you have to spend on the process is to use an online comparison service. All you have to do is put in the information you have about yourself and your vehicles and check out what offers you get. You can even make changes to the type of coverage that you want or things like the amount of mileage that you drive to get the most accurate quotes. This is also going to help you compare exactly the same coverage from different places.

Even if you’ve always been happy with the coverage that you had, it’s a good idea to get a few quotes from different places before you accept one.

Or before you accept a renewal quote. You may be able to get a better deal with your chosen company.

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2. Cut Coverage on Old Vehicles

The older your vehicle is the less likely you are to file a claim for it because the cost of repairs is likely not worth the deductible (and potential increase to your insurance). That means you don’t actually need the same amount of coverage that you might have had before.

You could likely reduce your coverage so that it only covers the basics. To figure out if your vehicle could have less coverage take a look at how much it’s worth and then divide by 8. If your premium costs more than that you’re paying too much per year.

3. Know Your Policy

When it comes to picking out your policy you have to know what it actually says. You have to understand all of those difficult and technical terms that are scattered throughout. Sure, it’s going to be difficult. But you absolutely need to know what they say. So, make sure you talk to someone to find out.

  • Who is covered
  • What is covered
  • What is excluded from coverage
  • What limitations apply to coverage
  • When coverage starts
  • When coverage ends
  • How much coverage are you getting
  • How much coverage costs
  • How to report a loss or claim

Talking with your insurance professional or the person who helps you to sign up for the policy is going to be the most important part of the process. You’ll be able to learn more about what the policy covers and doesn’t and what you may want or not want to add on. You’ll be able to get a good explanation for everything you don’t understand on your own.

4. Drive Less

You can absolutely reduce your insurance premiums by driving your vehicle less. Your insurance company is going to ask you how much you drive including your daily commute. If you drive less than the average then you’re going to be on track to save money. Make sure you specify that to your insurance company.

If you are interested in paying even lower insurance because of the low number of miles that you drive you can check out Metromile and other insurance companies that charge you based on the specific miles you drive. You pay less if you’re not covering all that distance.

If you’re in the market for a new job or a new house, look for something with a shorter commute. You’ll be able to save a whole lot of money because you’re cutting down mileage. You may even be able to cut down further by working from home, thus cutting out the commute entirely.

5. Ask for Discounts

You may think that the insurance company will offer you discounts if you qualify for them but that’s absolutely not the case. You won’t get anything for free. So, make sure you ask.

You should definitely ask if you’re new to the insurance company but if you’ve been there a while check to make sure of any discounts you may not know about.

  • Student discounts
  • New driver discounts (with training course)
  • Multiple vehicle discounts
  • Defensive driving course discounts
  • Online paperwork discounts
  • Clean driving record discounts
  • Affinity group discounts
  • Pre-pay discounts

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6. Take a Course on Defensive Driving

Those who don’t have a great driving record can actually help themselves by taking a defensive driving course. Check with your insurance company to see if they’ll give you a discount if you take and pass one of these classes and remember it needs to be done recently.

You do want to make sure that you’re paying for something that’s going to be worth it though. If the class is cost prohibitive that’s definitely not going to help you in the long run. You’ll end up spending more on the class than you will save from your insurance and that’s not going to be a good idea.

7. Keep Your Credit Score Up

Did you know that your credit score can actually affect the payments that you’re making it? Well it can. And if you can keep your credit score looking good you’re going to improve your premium.

Ask your insurance company to make sure they’re using your credit score and then work on increasing your score as best you can. You want to make sure that you’re paying bills on time and keeping your debts low, for example, to make sure your premium is impacted positively.

Your credit score can play a crucial role in the cost of your auto insurance. This chart created using data from The Zebra highlights the dramatic difference in the average cost of auto insurance between good and bad credit.

Whether you are looking for minimum or full coverage, the chart shows that you can expect to pay almost double the rate if you have bad credit, compared to good credit.

Average Auto Insurance Rates For Good and Bad Credit

8. Protect Your Vehicle

You can actually pay less for your premiums if you find ways to protect your vehicle. Things like putting in a car alarm or a tracking device can help because if your vehicle is ever lost or stolen it’s easier to find. That means your insurance company is less likely to have to do anything about it.

Talk with your insurance company to find out what you need to do.

9. Bundle Your Policies

If you buy your homeowner's insurance and your auto insurance from the same company chances are you’re going to have no problem getting a discount.

Plus, it’s going to be a whole lot easier for you to keep track of things. That’s definitely going to be a win-win situation for you.

10. Increase Your Deductible

The deductible is how much you’re on the hook for if something happens to your vehicle and you need to file a claim. The larger the deductible you agree to pay the lower your premiums are going to be.

Just keep in mind that a higher deductible means that if something happens you’re going to have to come up with that money all at one time instead of spread over the months like your premium.

How Much Should Car Insurance Cost For a New Car?

Insurance for a new car is typically more expensive than for an older model, owing to greater comprehensive and accident coverages. Preparing ahead of time and seeking for savings can save you a lot of time and help you discover a policy that is within your budget.

Car insurance firms may charge more to accept that risk if a particular make and model is more likely to be stolen. The National Insurance Crime Bureau publishes a study every year detailing the ten most stolen cars in the United States. These cars are usually at the top of the list because they aren't brand-new models. They're usually automobiles or trucks that haven't changed much in terms of design or parts from year to year, which makes them appealing to car thieves trying to dismantle the vehicle and sell the parts.

Another consideration is where you reside and where the vehicle will be parked. In general, insurance companies may view a new automobile parked on the street in a big city as riskier than a new car stored in a garage in a small town.

Check the Insurance Institute for Highway Safety's safety rating on the vehicle. Consider a car's overall safety record in a collision while looking for a new vehicle. Safety features may play a factor in the cost of insuring a new car, according to the III, in addition to the vehicle's overall safety record. You may be eligible for a car insurance discount if your new vehicle has safety features like anti-theft devices or blind spot indicators. Check with your car insurance provider to see if any discounts are available.

The cost of repairing or replacing your car influences the amount of auto insurance you'll pay. For example, if you buy a high-end sports car, the cost of restoring it after an accident will almost certainly be higher than repairing a typical four-door sedan. As a result, the type of car you choose has a significant impact on your car insurance rate.

Most drivers are aware that crashes can have an impact on insurance costs. In this chart using The Zebra data, you can see that an at fault crash increases the average cost of minimum coverage from $565 to $884. The price increase is even more significant if you have full coverage. You can expect to pay as much as 50% more on average.

How Much an at-fault Crash Raises Average Car Insurance Costs

According to the III, getting estimates from at least three insurance providers is a smart idea if you're shopping for car insurance on a new vehicle. Make sure each quote has the identical coverages, limitations, and deductibles so you can compare apples to apples.

You may be able to buy a new automobile without getting a new auto insurance coverage if you currently own one. Most insurance companies provide a grace period for new car purchases, during which any new cars you purchase will be covered under your current policy for a limited time. Each insurer has a different waiting period. Progressive, for example, provides customers 30 days to add a new car to their coverage, but other insurers would just give you a week.

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Our expert review team gathers data from many auto insurance providers in order to create rankings and estimate rates. 

Financial Stability: We analyzed each company based on industry benchmark ratings (summary table can be seen under “customer satisfaction” section) . Although insurance marketplaces do not have financial strength ratings they can still be useful tools for drivers who are looking for premiums at competitive rates. If you are looking for an insurer that doesn’t underwrite your policies, be sure to check the rating of the partner company. 

Coverage: Which types of insurance are available, their maximum coverage limits and any add-on policies. We also consider exclusions that are applicable to certain drivers.

Cost and Discounts: We review auto insurance rates estimates for many drivers across every state. The best scores are awarded to companies that offer lower rates and have many discount options for car insurance. You can lower your insurance premium by qualifying for any driver discounts. 

The discount percentages offered vary depending on where you live and some companies restrict the amount of discounts that can be applied to your premium. We looked at the discounts offered in the various companies that we reviewed. Many allow you to combine different insurance policies to save on premiums. There are many savings options for drivers shopping for car insurance. These include discounts based on the type of car, profession, driving record, and other factors. Companies that offer a variety of options could lead to a lower premium for drivers were favored by us.

Customer Service: We review customer feedback and reviews from J.D. Power. Data such as market share, complaints to the National Association of Insurance Commissioners for private passenger car insurance (2021) and overall ratio of those complaints to the industry average. 

In order to provide accurate and neutral information to our readers, our expert review team collects data from dozens of car insurance providers. Vehicles used include the 2017 Hyundai Sonata, 2017 Toyota Corolla, with annual mileage ranging from 10,000 and 20,000. We analyzed five credit tiers (excellent, good, very good, fair, and poor) and four types of people in different age groups. Lastly, we divided drivers to 4 categories based on safety history: Clean driving records, one at fault accident, one speeding violation, and one DUI.

We took into account parameters such as companies mobile apps, advanced online services, and telematics make it easier for auto insurers to respond to consumer needs. Many providers offer support via phone, email and agents. Some even offer live chat and 24/7 support via phone, email, or mobile app, while some provide social media responsiveness during weekends and after-hours hours.