Although maintaining car insurance is a requirement in most states, even basic insurance coverage can be quite expensive. On average, drivers in the U.S. pay $565 per year for minimum auto coverage. And comprehensive coverage can be even pricier.
However, this doesn’t mean you have to take out a second mortgage just to be able to drive to work with full coverage. While insurance costs are determined by a number of factors, including age, driving record, gender, and location, there are a few ways to get cheap car insurance.
In this blog post, we’ll cover all you need to know about the factors that drive car insurance prices down. Lowering your insurance costs means more money in your pocket each month — and more memories on the open road.
One of the best ways to save is to get multiple car insurance quotes from different companies. You can gather multiple insurance rates with our free search tool right now.
Factors That Influence Car Insurance Rates
Before we discuss what drives down car insurance costs, it’s important to look at the factors that influence rates in the first place. While some of these factors are in your control, some aren’t.
Below are the primary factors insurance companies take into account when pricing your car insurance policy.
Factor #1: Your Driving Record
Because insurance prices are largely determined by risk, it should come as no surprise that insurance companies favor safer drivers. Driving records are one of the easiest ways for insurance companies to assess risk and price policies.
For instance, if you’ve been in multiple accidents, your car insurance costs are likely to be much higher than those of someone who’s never been in a car accident.
But accidents are just one line on your driving record. By accessing your record, insurance companies can also see the following:
- Traffic tickets
- Parking tickets
- License restrictions
- License suspensions
While the rare speeding ticket may not seem like a big deal, a speeding ticket does affect your car insurance rate. Even minor violations can seriously raise the cost of your premium. The last thing you want is to seem like a “bad driver” in the eyes of the insurance companies.
Factor #2: Driving Habits
Although it may seem counterintuitive, insurance companies reward those who use their vehicles sparingly. This is because the more miles you log behind the wheel, the more you expose yourself to risk.
In general, if you have a long commute to work each morning, you can expect to pay more than someone who uses their car only on the weekends.
Factor #3: Your Car
One of the biggest factors that influence the cost of your insurance is the specific vehicle you drive, including:
- Year – Vehicles that are newer and in excellent condition tend to cost more to insure. This is because these vehicles cost more to repair and replace if they’re ever damaged. Older vehicles tend to be less expensive and thus less costly to insure.
- Make and Model – Less expensive vehicles tend to cost less to insure for the very same reasons. For instance, According to Forbes, while the expensive Tesla Model S carries an average annual premium of $3,960, the more affordable Honda CR-V LX carries an average annual premium of $1,574.
- Safety features – Finally, while a vehicle’s safety features can drive up insurance costs, they may also qualify the vehicle for discounts based on minimizing risk.
Factor #4: Location
If location matters to restaurants, it also matters to insurance companies.
Because dense urban areas experience higher rates of vandalism, theft, and auto accidents, urban drivers can expect to pay more in insurance costs than drivers who live in rural areas or small towns.
Where you park your vehicle also matters. Insurance companies deem some locations to be safer than others. For example, parking your car in a secure garage may lower your overall premium, while parking your car on the street may raise it.
Factor #5: Age and Gender
Although it may seem unfair, insurance companies take into account a driver’s age and gender when pricing insurance policies.
In general, mature drivers (those over 25) have fewer accidents than teen drivers. Older drivers thus carry less risk to insurance companies than younger drivers.
Gender also plays a role in insurance costs. Because men statistically have more accidents, DUI convictions, and minor traffic violations than women, insurance companies typically price insurance policies higher for men.
Factor #6: The Type of Coverage and Deductibles
Your coverage type and deductible limit also play major roles in determining the price of your policy. Although most states require you to have basic liability insurance coverage, you may find it prudent to purchase comprehensive coverage, collision coverage, and uninsured/underinsured motorist coverage. These additional coverages will increase your premium price.
Additionally, the higher your insurance deductible, the less you’ll generally pay upfront. This is because higher deductibles mean less money your insurance company has to pay to cover damages.
Now that we’ve covered the major factors that influence insurance rates, let’s dive into what causes insurance rates to decrease.
Save Money by Comparing Insurance Quotes
Compare Free Insurance Quotes Instantly
Secured with SHA-256 Encryption
When (and Why) Car Insurance Goes Down
As we’ve seen, many factors influence car insurance rates, and some of them are out of your control.
However, if you’re interested in lowering the price of your policy, there are a few things you can do. We’ve outlined three ways you can lower your car insurance rate below.
#1: Wait Until You’re 25
Your age is out of your control, but it’s good to remember that insurance rates generally decrease once you turn 25. After your 25th birthday, insurance companies consider you a “mature driver,” which means you’re statistically less likely to get into a major auto accident.
However, this doesn’t mean you have to wait until you’re 25 to lower your insurance rate.
#2: Adjust Your Current Policy
Because your premium is in part determined by the type of insurance coverage you maintain and your deductible, adjusting these may result in a lower annual price.
- If you’re more accepting of risk (and you own your vehicle outright), you might consider dropping comprehensive and collision coverage, which serves to protect your vehicle in the case of accidents, natural disasters, vandalism, and theft.
- Instead, you could simply stick to the minimum liability coverage, which covers your potential liability for another driver’s property damage or bodily injury in a car accident where you’re at fault.
- You may also want to lower your coverage limit. Your coverage limit is the maximum amount of money your insurance company will pay towards a claim. Decreasing this limit will result in an overall lower premium.
- Finally, you could increase your deductible (the amount you would pay out-of-pocket before your insurance kicks in). A higher deductible means less money that your insurance company has to pay to cover damages. This translates into a lower premium on your end.
#3: Shop Around and Bundle
While it may seem like the first insurance company that gives you a quote is giving you the best price, chances are there are better deals to be had. That’s why it’s so essential to compare car insurance quotes from several insurance companies.
In addition, look for discounts by bundling your car insurance policy with other insurance types. For instance, if you buy both car and home insurance from the same company, ask about any discounts for bundling the two together.
Many companies also give discounts for the following:
- Safe driving – As we’ve seen, being labeled a “bad driver” significantly drives up your premium price. Companies often reward discounts to drivers with clean records.
- Keeping your grades up – This discount usually only applies to students under 25 in higher education, but if you’re a college student making good grades, you may be eligible for a discount.
- Keeping your miles low – Some companies offer discounts to drivers who drive less than the average number of miles per year. This is because the fewer miles you log, the less likely you are to be in an accident.
- Installing safety features – Safe driving doesn’t only mean watching out for others on the road—it also means taking all the necessary steps to make your car as safe as possible. You may be eligible for a discount if your vehicle has safety features such as airbags and an antilock brake system.
- Installing an anti-theft device – Similar to installing safety features, installing an anti-theft device in your vehicle may result in a lower premium. These devices make your car less likely to be stolen.
- Renewing early – If you renew your policy earlier than its expiration date or pay for your entire policy upfront rather than in installments, you may be entitled to discounts.
- Taking a defensive driving course – Another way to demonstrate you’re a safe driver is to take a defensive driving course. Although these courses are usually taken by teenage and elderly drivers, anyone can enroll.
Do your research and find the company with the best auto insurance rate and the most relevant discounts. Before you make your final decision, be sure to compare auto insurance rates with our free search tool to find the cheapest insurance rates in your area.