The cost of car insurance is on the rise. In 2019, the average insurance rate came in at just over $1,070, and in 2021, this number was $1,342. While national trends around vehicle accidents and repair costs play a significant role in the overall price of insurance, individual drivers can also make choices and take actions that can help keep their total costs down.
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Insurance companies consider a number of driving trends when setting insurance rates, such as the average cost of vehicle repairs, the average number of miles driven, and the average number of motor vehicle accidents. For example, the total number of fatalities from motor vehicle accidents rose by 10.5% from 2020 to 2021, indicating that drivers are more likely to be involved in a deadly collision.
The average cost of repairs also impacts consumer insurance costs because if materials and labor are more expensive, then the total cost to fix your vehicle would go up as well; insurers could raise rates accordingly to offset this increase. If the average number of miles driven per vehicle is also on the rise, this ramps up wear and tear on cars and makes accidents more likely because of the longer distances traveled by the average driver. In addition, personal factors beyond your control, such as your age and driving history, may also impact your overall rates.
However, this does not mean that the cost of your car insurance is completely out of your hands. Many factors, such as your individual driving history, credit score, and coverage limits, are heavily considered too when obtaining rates, and these things are within your control. With the right approach and careful planning, you can save money on car insurance.
Clean Up Your Driving Record
Your driving record contains basic information about you as a driver, like your name, address, birthday, driver’s license number, and details about any vehicle-related incidents, including accidents, tickets, and license demerits or suspensions.
Insurance companies use these records to create a risk profile for each driver. The more incidents on your driving record, the higher your risk and the higher your overall insurance rates will be. In 2020 alone, insurance companies paid out more than $81 million in liability claims and $54 million in physical damage claims. Since higher-risk drivers are at a higher risk of collisions and other traffic incidents, they represent a greater financial risk to insurance companies. As a result, their total premiums and deductibles may be higher.
Consider a driver with 3 accidents on their driving record, all of which were determined to be their fault. This pattern of past behavior suggests a similar pattern moving forward, making it more likely that insurance companies may need to pay out for claims.
Depending on the insurance company, drivers may be asked to provide records extending back 2, 3, or even 5 years. While driving offenses such as traffic tickets may result in slight premium increases, more serious issues such as at-fault accidents that cause injury or alcohol-related offenses may come with significant cost increases.
You can help clean up your driving record by taking a defensive driving course to improve your skills and reduce your risk on the road. Other courses may offer the ability to remove demerit points from your license upon successful completion. Every state differs in its options, so check with your Department of Motor Vehicles to learn more.
Practice Safer Driving Habits
The safer your driving habits, the lower your risk of getting into a collision and needing to file a claim. To determine whether you are a safe driver — and so a safe insurability bet — insurance companies consider the number of miles you drive each year. The more miles you drive, the greater chance you have of being in a vehicle-related incident, whether it is property damage or injuries from collisions.
For example, in the first half of 2021, the number of vehicle miles traveled (VMT) increased 13% compared to the same period in 2020; accident fatalities rose by 18.4% in the same period. As a result, your rates may be higher the more you drive each year, and you may be able to reduce your insurance costs by driving less overall.
You may also be able to lower your rates by taking defensive or safe driving courses and then providing proof of completion to your insurance company. The more recently these courses were taken, the better. This could be beneficial even if you do not need to take the course to remove a minor violation from your driving record.
It’s also possible to reduce the risk you represent to your insurance company by making smart choices on the road. This means choosing to obey speed limits, ensuring that your vehicle undergoes regular maintenance, and keeping your license and registration current and valid.
Safer driving habits may also benefit you when it’s time to renew your policy since the longer you go without a major collision or incident, the lower your total risk. By prioritizing safe driving, you can demonstrate a pattern of safety and security to your insurance provider.
If You’re a Young Driver, Add an Experienced Driver to Your Policy
Age matters when it comes to risk. While 16 to 19-year-olds account for 3.5% of licensed drivers, they represent an outsized 8.9% of drivers in crashes and 6% of drivers in fatal crashes. Meanwhile, drivers aged 55 to 64 account for 17% of all drivers, but only 13.6% of those involved in fatal crashes.
Put simply, younger drivers have a higher likelihood of being involved in a collision or fatal accident because of their inexperience behind the wheel. With insurance companies looking to minimize risk, a driver’s age becomes a factor in determining insurance rates. While there is no quick fix for age — new drivers must simply keep driving safely to build up a history of low-risk vehicle operation — it may be possible to reduce perceived risk by adding an older, statistically safe driver to an insurance policy.
For example, a 16-year-old who has just obtained their license could include an older parent or guardian with more driving experience on their insurance policy. This may be seen as a mitigating factor since the vehicle may be driven by both lower- and higher-risk drivers, in turn reducing overall risk.
Maintain Active Insurance Coverage, Even When You’re Not Driving
Both your claims history and any policy lapses may impact your insurance costs. The more claims you make, the more money your insurance company pays out, making you a riskier driver to insure. For example, an insured driver may have had 2 accident claims in the last year: a claim for when they hit a post and another months later when they struck another vehicle.
In the first claim, the insurance company paid for the repair of the policyholder’s vehicle after they met their deductible. In the second, the insurer paid for the repair of both the policyholder’s vehicle and that of the other driver, plus any expenses due to injury incurred by the other driver.
Collectively, this is costly for the insurance company, which may, in turn, result in rates being raised when the policy is up for renewal. The fewer at-fault claims you make, the better your insurance rates will likely be.
Keep in mind, though, that if you make claims for incidents where you are not at fault, your insurer is not likely to increase your rates because of it. This is because in claims where another driver is at fault, it is that driver’s insurance company that ultimately pays for the damages to your vehicle. When you make a claim with your insurance provider, they cover the costs of your repairs (or vehicle replacement) and are then reimbursed by the other driver’s insurance company.
Your perceived risk may also increase if you let insurance coverage lapse on your vehicle, even if you’re not driving it. In this case, it may be worth purchasing auto insurance that covers damage and theft of your vehicle while in storage, providing continuous coverage until you start driving again.
Reconsider Your Auto Insurance Type
You may also be able to save money on auto insurance with non-standard insurance types, such as pay-per-mile or non-owner insurance.
Pay-per-mile is exactly what it sounds like: You pay a set amount of money per mile driven, plus a base monthly fee, for your car insurance. This type of insurance may be a good choice if you don’t drive regularly since you still get the same type of insurance coverage but at a potentially lower cost. For example, a pay-per-mile policy may have a base rate of $30 per month plus 6 cents per mile. If you only drive 300 miles in a month, you would pay $18 for the miles driven (300 x $0.06) plus the $30 per-month fee, or $48 total for the month. Depending on the amount you drive each month and each year, this could be significantly less than a standard auto insurance policy’s rates.
Non-owner insurance is another non-standard option for those who don’t own a car but still drive. For example, you may regularly rent a vehicle or borrow a car when visiting friends or family at certain times of the year. While your total insurance costs are less because the vehicle doesn’t belong to you and you do not drive nearly as much as the average car owner, you still get the benefit of collision and injury coverage.
Improve Your Credit Score
Your credit score is a 3-digit number representing your likelihood of paying bills on time and avoiding defaulting on loans or debts. The higher your score, the better. Insurance companies may take this score into account when setting your insurance rates and deductible. If you have a low credit score, your insurance company may stipulate a higher deductible before your coverage activates.
If you can consolidate or pay down existing debts, you may be able to increase your credit score and, in turn, save money on your car insurance.
Increase Your Deductibles
Your deductible is the amount you pay out of pocket before your insurance coverage takes over. Deductibles are assessed on a per-claim basis, which means that you pay your full deductible each time you make a claim. Increasing your deductible may help lower your insurance rates since your provider pays less on their end for repairs to your vehicle.
For example, if you have a $500 deductible and are involved in an accident with costs totaling $2,500, you would pay $500 and your insurance company would cover the remaining $2,000. If you increase this deductible to $1,000, you would pay more upfront while your insurance company would pay less. As a result, increasing your deductible may be enough for an insurer to offer a reduced monthly premium. As long as you make minimal claims during your coverage term, you would save money overall.
Lower Your Insurance Coverage Limits
Coverage limits are the maximum amount your insurance company pays out per accident. If you have a $25,000 limit for bodily injury, your provider pays up to this amount, after which you are responsible for any additional costs.
States also have minimum coverages for bodily injury per person, bodily injury total per accident, and property damage. In Alabama, for example, the state minimum is 25/50/25, which means $25,000 in bodily injury per person, $50,000 for bodily injury per accident, and $25,000 for property damage. Each state has its own minimum coverages if they require auto insurance, so check with your state’s department of insurance to learn more.
If your current coverage is above state minimums, you may be able to save money by reducing your coverage, which would lower your premiums.
Look Into Bundling Policies and Other Discounts
While each auto insurer has its own approach to risk and cost calculations, there are some common discounts that may help you lower your total costs.
One is bundling policies — for example, if you purchase policies for multiple drivers in your home or purchase home insurance alongside your vehicle insurance — your provider may offer a discount on additional policies. Younger drivers may receive discounts for good grades. You may also be able to get discounts for putting winter tires on your car, renewing your policy for a certain number of years, or installing devices that track your mileage to help collect insurance data statistics.
Prepay For Coverage Instead of Paying Monthly
Some insurers may offer discounts if you prepay for coverage instead of paying monthly. Common options include paying 6 months or a full year of premiums up front rather than month to month. Because insurers don’t need to worry about payments coming in on time if you pay upfront, they may offer discounts on your total premium.
For example, if your monthly premium is $150 per month, you would end up paying $1,800 for a year of coverage. However, if you agree to pay half upfront and another half at the 6-month mark, your insurance provider might agree to reduce your total premium to $1,600, meaning you would pay $800 every 6 months, which comes out to just over $133 per month.
Reconsider Your Auto Insurer
In some cases, even taking the steps listed above may not have an impact on your insurance rates. If so, it may be worth reconsidering your current auto insurer and looking for another provider. Start with basic research by reaching out to other insurers and getting a few quotes for standard coverage along with information about any potential discounts.
Then, you would have enough information to either make the switch to a new provider or contact your current provider and ask them to match the offer. In either case, you may be able to save money on car insurance by shopping around.