How to Save Money on Car Insurance Without Being Underinsured

To save money on car insurance, compare quotes for the same coverage from several insurers before you renew, raise your deductible only as far as your savings allow, and ask for every discount you qualify for. How to save money on car insurance comes down to paying a fair price for the cover you need, not to buying the least cover possible.

This guide uses consumer guidance from the National Association of Insurance Commissioners (NAIC), the group of US state insurance regulators, and the Insurance Information Institute (III). Insurance is regulated state by state in the US, so required coverage and allowed pricing factors differ; we note UK differences where they matter.

What lowers car insurance costs the most?

Shopping around, choosing the right deductible and dropping cover an old car no longer needs usually make the biggest difference. Discounts help, but they're often smaller.

Car insurance is one of the bills that renews quietly every year, which is exactly why it rewards a yearly review. Our step-by-step method to save money every month builds that kind of renewal check into a simple routine.

How do you shop around for car insurance?

Get at least three quotes for identical coverage, about a month before renewal, and compare price alongside service and the insurer's financial strength. The III recommends at least three quotes; the NAIC notes that prices can differ among companies and that service and dependability matter too.

How to do it well:

1. Write down your current coverage. Liability limits, collision and comprehensive deductibles, uninsured motorist cover and any add-ons. Use the same numbers in every quote.
2. Give complete, accurate information. The NAIC stresses that your quote is only as good as the details you provide; a cheap quote built on wrong information can change later.
3. Check different types of insurer, such as companies that sell directly, through captive agents or through independent agents who quote several companies.
4. Look up complaints and financial strength. Your state insurance department is the official place to check a company's license and complaint record.
5. Ask your current insurer to match or review. Tell them you're comparing; ask them to recheck your discounts and details.

Switch only after the new policy's start date is confirmed, so there's no gap in coverage.

UK drivers

Since January 2022, the Financial Conduct Authority's rules require UK home and motor insurers to offer a renewal price no higher than what an equivalent new customer would pay with the same firm. That removes the "loyalty penalty" from your own insurer, but other insurers may still be cheaper, so comparing is still worth doing.

Should you raise your car insurance deductible?

Raise it only to a level you could pay from savings tomorrow. A higher deductible lowers your premium because you take on more of each claim.

According to the III, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15% to 30%, and going to a $1,000 deductible can save 40% or more. The deductible applies to those physical-damage coverages, not to liability.

Example (hypothetical): your collision and comprehensive cover costs $600 a year with a $500 deductible, and a $1,000 deductible would bring it to $480. You save $120 a year but take on $500 more risk per claim. If you'd have to borrow to pay a $1,000 deductible, the saving isn't worth it yet. Build the cash first; our guide on how to build an emergency fund shows how.

When should you drop collision or comprehensive coverage?

Consider it when your car's value is low compared with what that coverage costs. The III suggests considering dropping collision and comprehensive if the car is worth less than 10 times the premium for that cover.

Things to check first:

• Your car's current market value, using a reputable pricing guide.
• Whether you could replace the car from savings if it were totaled.
• Your loan or lease contract. Lenders usually require collision and comprehensive until the car is paid off.
• What comprehensive covers where you live, such as theft, hail or flood. In some areas, keeping comprehensive while dropping collision may make sense.

Which car insurance discounts should you ask about?

Ask your insurer to list every discount you might qualify for, then check each one appears on your policy. The NAIC lists common ones:

• Two or more cars on the same policy
• Completing a driver education course
• Good student, for drivers under 25
• Mature driver, roughly ages 50 to 65
• Airbags and other safety equipment
• Anti-theft devices
• Auto and home insurance with the same company

The III adds others to ask about, including low-mileage discounts, carpooling, group plans through employers or alumni and professional associations, a clean record with no accidents or moving violations for a set number of years, and defensive driving courses.

Also verify the basics on your declarations page every renewal: address, vehicle details, annual mileage, drivers listed and discounts applied. The NAIC recommends reviewing this regularly because errors can raise your premium.

Is usage-based car insurance worth it?

It can be worth it if you drive few miles and drive smoothly, but read the terms first. Usage-based insurance, also called telematics, tracks your driving through a device or a phone app.

According to the NAIC, these programs can measure miles driven, time of day, location, rapid acceleration, hard braking and hard cornering. Lower-risk drivers may pay less, and the NAIC also notes the privacy concerns of being tracked.

Before you enroll, ask:

• What exactly is tracked, and for how long?
• Can the program raise your rate as well as lower it?
• Is the data shared with anyone else?
• What happens if you leave the program?

Does your credit affect car insurance rates?

In many states, yes. The III notes that insurers find people who manage credit well tend to have fewer claims, and many use credit-based insurance scores in pricing.

Some states restrict this. According to Experian, California, Hawaii, Maryland, Massachusetts, Michigan, Oregon and Utah have strict limitations on using credit for auto or home insurance, and the rules differ between them. Your state insurance department can tell you what's allowed where you live.

Improving your credit takes time, but paying bills on time and keeping card balances low helps here as well as with loans.

What should you never cut to save on car insurance?

Don't drop below your state's required coverage, don't let the policy lapse, and don't underinsure liability to save a few dollars. These cuts can cost far more than any discount saves.

• Liability limits. State minimums are a legal floor, not a recommendation. If you cause a serious accident, costs above your limit can fall on you.
• Continuous coverage. A lapse can make your next policy more expensive and, in most states, driving uninsured is illegal.
• Honest answers. Leaving off a driver or misstating where the car is kept to lower the price can lead to a denied claim.

For other bills that are worth a yearly review, see our money saving tips for everyday life.

Next steps

Find your renewal date and put a reminder a month before it. When it arrives, write down your current coverage, get at least three quotes for the same cover, ask about discounts and check your policy details.

Insurance is one of several car costs; our guide on how to save money on gas covers the one you pay every week. To keep the money you save instead of letting it disappear into spending, follow our simple monthly plan to save money. And for ways to add income alongside lower bills, see our guide to making money online.