8 Ways to Lower Your Car Insurance Bill
Money + Markets

8 Ways to Lower Your Car Insurance Bill

If you got sticker shock the last time you renewed your car insurance, you’re not alone. Car insurance rates are on the rise across the country. Rates climbed by an average of 16 percent last year to $926.

The increase reflects higher car insurance payouts in recent years as a falling unemployment rate and low gas prices have led to more people driving — and more car accidents as a result. The fancier cars on the road today also drive up insurance payouts. “While many of these cars have all types of safety features that might help in accident avoidance, they also have high–tech components, which are more expensive to fix and replace once damaged,” says Loretta Worters, a spokeswoman for the Insurance Information Institute, a New York-based trade group.

Related: The Shocking Secret About How Your Car Insurance Rate Gets Set

Technology isn’t the only thing making claims more expensive. Insurers are also shelling out more to cover rising health care costs, legal fees and lost wages. That’s put pressure on their bottom line, leading them to hike your insurance rates. Just because many insurers are raising rates, however, doesn’t mean that you can’t trim costs.

How exactly rates are set is a bit murky, with many insurers using factors that aren’t directly related to your driving record, such as your credit score or your marital status. The peculiarities of those systems, however, also mean that it’s often possible to find a better deal. Follow these tips to drive down your monthly car insurance payments.

1. Forget about loyalty. Get quotes from at least five insurers before settling on a rate. That’s especially important for drivers who haven’t compared rates recently. Like other merchants, retailers now employ dynamic pricing. If their algorithm tells them that you’re unlikely to compare rates, they’re more likely to increase what they charge you. “A lot of people have inertia in terms of insurance shopping so they don’t do it,” says NerdWallet insurance expert Amy Danise. “But we have seen variations of several hundred dollars per year for the exact same coverage.”

Related: 21 Ways to Slash Your Car Insurance Bill

Even if you’ve recently shopped around for insurance quotes, going through the process again a few months later might yield additional savings. Insurers change their rates throughout the year, so the quote you got in October might be significantly different than one you’d get now. The good news is that online insurance comparison sites have made it a snap to get quotes from multiple insurers quickly.

2. Ask for discounts. There are a plethora of price breaks available to drivers, for everything from going paperless on your bills to driving a green car to telecommuting to being a good student. Even after you’ve shopped around, ask your current insurer whether you might qualify for any discounts that could reduce your rates.

3. Raise your deductible. An easy way to pay less for your monthly premiums is to increase your deductible, or the amount you’ll have to pay upfront for a claim before coverage kicks in. “The first dollars of insurance are always the most expensive, because there are more small claims than big ones,” says Bob Passmore, an auto expert with the Property Casualty Insurers of America.

Related: The 10 Most Expensive States for Owning a Car

Raising your deductible can make for easy savings, as long as you have an emergency account that could cover an unexpected expense. If you don’t, consider directing any premium savings into an account for that purpose.

4. Bundle your policies. If you’ve got multiple cars with multiple insurers, or if you have a homeowners and auto policy with different insurers, combining them could lead to savings. Ask both insurers to offer you their best price for a bundled policy, and then decide whether you’re better off keeping the policies separate.

You’ll get an even better deal if you bundle a renters’ policy with your car insurance. “Responsible people are the ones asking for renters’ coverage and a discount, and insurers see them as a good risk,” says Allie Feakins, head of analytics at Compare.com.

Related: Do You Need These 5 Types of Insurance?

5. Consider pay-as-you-go insurance. A growing number of insurers are offering a pay-as-you-go option that can be a good way for infrequent or low-mileage drivers to save. Drivers attach a dongle that tracks their miles to their car and then are billed for insurance based on the distance driven. Since the programs are still relatively new, some insurers will give you a big discount just for trying it out. You may also be able to use your insurer’s app to track your driving and determine whether you might be a good candidate for that type of insurance.

6. Drop collision coverage on older cars. Cars depreciate significantly over time, so your collision coverage becomes less valuable. If your car needs to be repaired or replaced after a crash, your insurance company will only pay out up to the market value of the car (finds yours at KBB.com). If you have an old car and a high deductible, it may be a waste of money to continue paying for collision coverage, since the payout likely won’t be enough to easily replace the vehicle anyway.

7. Improve your credit. Since insurers in many states do factor your credit profile into your rate, improving your credit can have a noticeable impact on your bills. In some states, bad credit can push your premiums up even higher than an accident. Check your credit report for any errors; set up automatic payments so that you’re never late for recurring bills; and make a concerted effort to pay off debt. A higher credit score will mean not only lower premiums on car insurance, but also better rates on home and auto loans, and access to a better class of credit cards.

Related: Your Credit Score — What It Is and Why It’s So Important

8. Be a better driver. The most obvious factor in your premium rate, of course, is your riskiness as a driver, based on your age and your history. If you’ve had a lot of accidents or speeding tickets, consider taking a defensive driving class (that alone could get you an insurance discount), and make a concerted effort to drive more carefully and follow traffic rules. A good starting point: Never look at your phone while you’re driving.