The cost of auto insurance is different for every driver depending on the state they live in, their choice of insurance company and the type of coverage they have. But when you’re trying to save money on car insurance, it helps to know what the average driver pays.
On average, the average person spent $1,190 on car insurance in 2018, based on the latest figures from the National Association of Insurance Commissioners (NAIC)1. Auto insurance premiums rose 30% from 2014 to 2018, according to NAIC data, despite the fact that the number of insured vehicles only increased by 7%1.
Data from AAA puts the average cost of auto insurance for new vehicles slightly higher in 2020, at $1,202 per year2. The numbers are pretty close, suggesting that if you’re budgeting for a new car purchase, you may need to shell out $100 or so a month for car insurance.
Remark
While some things that affect car insurance rates, such as your driving history, are within your control, costs can also be affected by things like government regulations and accident rates.
How to save on car insurance costs
There are a number of strategies you can use to save on car insurance. Once you know how much car insurance will cost you, you can employ some or all of these tactics.
1. Take advantage of multi-car discounts
If you get a quote from a car insurance company to insure one vehicle, you may get a higher quote per vehicle than if you inquire about insuring multiple drivers or vehicles with that company. Insurance companies offer what amounts to a bulk rate because they want your business. Under some circumstances they are willing to give you a deal if it means you get more of it.
Ask your insurance agent if you qualify. In general, several drivers must live in the same home and be related by blood or marriage. Two unrelated persons may also be able to get a discount; however, they must usually jointly own the vehicle.
If one of your drivers is a teenager, you can expect to pay more to insure them. However, if your child’s grades are a B average or above or if they are in the top 20% of the class, you may be able to get a good student discount on coverage, which generally lasts until your child turns 25. can range from as little as 1% to as much as 39%, so be sure to prove to your insurance agent that your teen is a good student.
Incidentally, some companies may also give a car insurance discount if you maintain other policies with the company, such as homeowners insurance. For example, Allstate offers 10% off auto insurance and 25% off homeowners insurance when you bundle them, so check to see if such discounts are available and applicable.
2. Pay attention on the road
In other words, be a safe driver. This should go without saying, but in today’s era of increasing in-car distractions, it should be mentioned as much as possible. The more thoughtful you are, the more accidents or traffic violations you can avoid – events that increase your insurance rates. Travelers offers safe driver discounts between 10% and 23%, depending on your driving experience.4
For those who don’t know, points are typically awarded to a driver for moving violations, and more points can lead to higher insurance premiums (all else being equal).
3. Take a defensive driving course
Sometimes insurance companies give a discount to those who take an approved defensive driving course. Drivers may also be able to reduce the number of points they have on their license by driving defensively, avoiding accidents, or taking another course.
Be sure to ask your agent/insurance company about this discount before signing up for a class. After all, it is important that the effort expended and the cost of the course translate into sufficient insurance savings. It is also important that the driver registers for a recognized course. Each state has its own rules about accredited defensive driving courses, and GEICO allows you to check what they are state by state on its website.
3. Take a defensive driving course
Sometimes insurance companies give a discount to those who take an approved defensive driving course. Drivers may also be able to reduce the number of points they have on their license by driving defensively, avoiding accidents, or taking another course.
Be sure to ask your agent/insurance company about this discount before signing up for a class. After all, it is important that the effort expended and the cost of the course translate into sufficient insurance savings. It is also important that the driver registers for a recognized course. Each state has its own rules about accredited defensive driving courses, and GEICO allows you to check what they are state by state on its website.
4. Shop around for better car insurance rates
If your policy is about to renew and the annual premium has increased significantly, consider shopping around and getting quotes from competing companies. Also, it probably makes sense every year or two to get quotes from other companies, just in case there’s a lower rate.
Remember that cheap doesn’t always mean good, and choosing the cheaper company isn’t always the wisest decision. The creditworthiness of the insurer must also be taken into account. After all, what good is a policy if the company doesn’t have the funds to pay an insurance claim?
To check out a particular insurer, consider visiting a site that rates the financial standing of insurance companies. The financial strength of your insurance company is important, but what your contract covers is also important, so make sure you understand it. The Insure.com site bases insurance company ratings on data collected by Standard and Poor’s.6
In general, the fewer miles you drive your car per year, the lower your insurance rate is likely to be, so always ask about a company’s mileage thresholds.
5. Use public transport
When you sign up for insurance, the company usually starts with a questionnaire. One of the questions it asks, for example, is the number of kilometers you drive per year with the insured car.
If you use your vehicle to commute to work for three hours each day, you will generally pay more insurance premiums than someone who drives just one mile a day. If possible, try to use public transport to accumulate fewer miles, bearing in mind that you will usually need to significantly reduce your mileage before getting a discount. Ask your insurance company about the company’s different mileage thresholds so that your efforts are not in vain.
Also, check with your provider to see how many miles you currently drive, as most can give you an enhanced insurance quote.
6. Downsize your vehicle
Buying a huge SUV may sound exciting, but insuring a £5,000 premium vehicle can be more expensive than insuring a small (but safe) cheaper commuter car. Some insurers give a discount if you buy a hybrid or an alternative fuel vehicle. For example, farmers give a 5% discount.7
You can feel good about protecting the environment and saving money on insurance at the same time. Find out the exact rates to insure the different vehicles you are considering before making a purchase.
7. Raise your deductible
When selecting auto insurance, you can usually choose a deductible, which is the amount you would have to pay before the insurance company picks up the bill in the event of an accident, theft, or other types of damage to the vehicle. Depending on the policy, deductibles typically range from $250 to $1,000. The catch is that, in general, the lower the deductible, the higher the annual premium.
Conversely, the higher the deductible, the lower the premium. Ask your agent how your premium might be affected if you increase your deductible. It could improve the annual premium by a few percentage points and put some money back in your pocket, or the savings could be minimal. If you’re reluctant to file smaller claims to avoid increasing your premium, raising the deductible can be a particularly sensitive step.
8. Improve your credit rating
A driver’s record is obviously a big factor in determining auto insurance costs. After all, it makes sense that a driver who has had many accidents can cost the insurance company a lot of money. However, people are sometimes surprised that insurance companies can also take credit ratings into account when determining insurance premiums.
Why is your creditworthiness taken into account? Michael Barry, senior vice president and head of media relations at the Insurance Information Institute, puts it this way
9. Consider location when estimating auto insurance rates
You are unlikely to move to another state simply because it has lower auto insurance rates. However, when planning a move, the potential change in your auto insurance policy is something you’ll want to factor into your budget.
10. Check your coverage
Dropping certain types of cover can be a slippery slope. After all, nobody can predict if and when an accident will happen. However, if you’re driving an extremely old car that’s on its last legs, it may make sense (depending on cost, your driving habits, and other factors) to drop collision or comprehensive coverage.
The reason for this is that the vehicle was involved in an accident, the insurance company would probably declare the car a total loss. If the car’s value is only $1,000 and the collision coverage costs $500 a year, it may not make sense to buy it.