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How Can You Lower Your Car Insurance Costs
Money Motivation Saving Money

How Can You Lower Your Car Insurance Costs

Did you know that the average American pays over $1,000 yearly for car insurance? In some states, the cost of car insurance can be much higher. And while many factors determine the answer to “how much is car insurance,” one of the most important is how you use your vehicle.

Here are a few tips if you’re looking for ways to reduce your car insurance costs.

Drive less.

One of the best ways to lower car insurance costs is to drive less. If you can carpool, take public transportation, or ride your bike when possible, you’ll likely see a reduction in your rates.

Driving less is not only good for your wallet, but it’s also good for the environment. Fewer cars on the road mean reduced air pollution and fewer greenhouse gas emissions. 

Pay your premiums in one lump sum.

Rather than paying monthly, where a fee is added, pay the entire bill every six months to save money. On average, you can save around $100 per six-month term.

Create a sinking fund in a high-yield savings account by taking the total premium cost and dividing it by 6 (for a 6-month premium), this will allow you to save money by paying in full and earn interest on your money. 

>> Sign up for a high-yield savings account here (CIT Bank is currently offering 4.05% APY).

>> Learn more about Sinking Funds here

Drive a safe car.

Another way to lower car insurance costs is to choose a safe vehicle. Cars with safety features like airbags and antilock brakes tend to be less expensive to insure. 

If you’re in the market for a new car, check out the safety ratings before making your purchase. Avoid vehicles with frequent safety recalls, and ask your agent about the best cars for your family budget.

More ways to save!

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  • GetUpside: Earn 20 cents per gallon on gas cash back when you download the app and use code FIAB20.
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  • GoodRx: Free app that provides you savings of up to 80% on your prescriptions (even if you don’t have insurance). $5 sign up bonus!
  • Rakuten: Get cash back on online purchases and automatic coupons and savings with their browser plugin… and remember, you have to make a $20 purchase to get your $20 for free!
  • Lively: A modern health savings account. Prepare for tomorrow by making smart decisions about finances and healthcare today. Lively HSAs are free for individuals and families, so you never have to worry about hidden costs.
  • Build Wealth by Investing in Index Funds Course: I’ve teamed up with my friend Jeremy from Personal Finance Club to teach you everything you need to know to invest in index funds! How to open an account, how much to invest, and how to choose an index fund. You’ll gain the knowledge and confidence to optimally invest and build wealth for decades.

Check your credit score.

Some insurers use credit scores as a factor in determining rates. If your credit score is good, you may be able to get a lower rate.

Additionally, some states use credit scores as a determining factor for rates. If you live in one of these states and have a good credit score, you may be able to get a lower rate.

The bottom line is that there are many ways to save on car insurance.

Take a defensive driving course.

If you can show your insurance company that you’re willing to take steps to be a safer driver, you may qualify for a discount. Defensive driving courses teach you how to avoid accidents and can often be taken online or at your local community college.

Most insurance companies will offer a lower rate to those who have completed a driver’s education course if you’re insuring a young driver. Young drivers who take a safe driving course are statistically less likely to cause a collision.

They are also better prepared to avoid accidents on the road than those who have not taken a similar driving course.

Ask about discounts.

Many insurers offer discounts for things like having a clean driving record or being a safe driver. Some companies also offer discounts if you drive less than a certain number of miles per year. 

Many insurance companies also offer a discount if you agree to download their app and let your driving habits be recorded through your GPS. Military service, AAA, and AARP membership can also decrease your rates.

Be sure to ask your insurer about any discounts available to you.

>> Sign up for AAA here.

Shop around.

Don’t forget to shop around for car insurance. Rates can vary widely from company to company, so it pays to do some research before you purchase a policy. Companies like Credit Karma partner with insurance companies to offer discounts and show you many rates at one time to make shopping easier.

Don’t forget that you should compare equal coverages when you shop. That way, you know you’re getting rates for the same benefits from each company.

When renewing your insurance for another year, talk to your agent about reviewing your needs and rates. If there have been no claims or your circumstances have changed, you may be able to reduce your monthly rates.

Raise your deductible.

This will lower your monthly payments, but you will have to pay more out of pocket if you have an accident. Consider dropping collision or comprehensive coverage if your car is old and not worth much.

Suppose you’ve had a spotless driving record and rarely take driving risks or have savings set aside for auto repairs. In that case, you could raise your deductible and reduce your monthly costs.

Bundle policies.

You may qualify for a discount when you combine your home and auto insurance with the same company. This can often save you money.

Additionally, when you bundle your policies, all of your insurance needs will be handled under one roof, rather than having different agents for each investment. Some insurance companies even partner with life insurance and health insurance companies, so everything is under one roof.

Cut unnecessary coverage.

If you’re driving an older car that isn’t worth much, you may want to consider dropping collision or comprehensive coverage. If your vehicle is totaled or stolen, the insurance company will only pay you up to the value of your car, minus the deductible.

Additionally, suppose you live in an area with minor crimes. In that case, you may want to forego comprehensive coverage covering theft and vandalism.

The bottom line is that there are many ways to save on car insurance.

Frugal living.

Following these tips can help you lower your annual car insurance costs. However, it’s crucial to compare rates and coverage options from different insurers to ensure you’re getting the best deal.

Take this year to challenge yourself to save money and learn to live frugally, starting with your insurance costs. Many people are surprised at how much they can save by making small changes to their spending habits.

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