Are you tired of spending a ton of your hard-earned money on auto insurance? It’s not an expense that you can completely get rid of, but there are ways to cut costs without giving up the coverages you need. In this guide, you’ll learn more about how auto insurance providers set rates and how to get the protection you need without spending a fortune on premiums.
What is the Average Cost of Auto Insurance in the U.S.?
The average cost of car insurance is approximately $1,951 as of mid-2021, according to policies brokered by auto insurance comparison site Gabi. This equates to roughly $163 per month.
What Factors Determine Auto Insurance Rates?
There are several factors auto insurance companies use to come up with rates, including:
- The type of car you drive: Auto insurance providers assess the cost of the vehicle and its safety rating, among other factors, to assess rates.
- Age of your vehicle: Drivers who are under the age of 25 generally pay more for auto insurance coverage than seasoned drivers. But if you’re older and have been driving for some, a shaky driving record could equate to steeper premiums.
- Your gender and age: The auto insurance rates for men are typically higher than they are for women, and for a few good reasons. Male drivers are more likely to be involved in serious accidents or charged with a DUI. Consequently, car insurance companies charge more to offset those elevated risks. Also, young drivers with less experience pay more for coverage than older drivers.
- Your location: Do you live in a metropolitan area, mid-sized city or small town? The risk of auto-related incidents is far lower in areas with small populations, so your auto insurance rates will likely be lower.
- Your annual mileage: Your insurance rate may vary based on how much or how little you drive every year.
- Your driving history: Is your driving record stellar, or does it include traffic violations, accidents or both? A clean driving history means you’ll likely qualify for better auto insurance rates than individuals with blemishes on their driving record. You should also know that new drivers are often assessed higher premiums since there’s no driving history to go review.
- Your coverages: Do you have basic coverage, as required in your state of residence, or add-ons with steep limits?
- Your deductibles: Is your deductible on the higher or lower end? The higher the deductible, the lower the premiums. However, you can expect to pay more out of pocket when you file a claim.
- Your credit rating: In some states, auto insurance providers are permitted to use credit-based insurance scores to set rates. This figure sheds light on the probability of a driver having to file a claim and how much it will cost the provider.
- Your usage: How do you plan to use your vehicle? Will it be for commutes to and from work, for leisure or both? Will you drive several miles to work, or is your place of employment nearby? Auto insurance providers consider all these factors when deciding how much to charge you for coverage. The more you drive, the more likely you are to be involved in an auto accident or have your car stolen. So, you can expect higher premiums.
How Much Can You Save on Auto Insurance?
It varies by the auto insurance provider and the policyholder. Below are some statistics to illustrate how much you can possibly save:
- Drivers with good credit and safe driving records can reduce their premiums by over $150 each month by switching to a new provider (source: Nerd Wallet)
- Drivers who attend traffic school to keep moving violations off their driving record could see annual premium reductions of up to $413 (source: Nerd Wallet)
- Drivers who raise their deductibles enjoy average cost savings between 7 percent and 28 percent (source: Forbes)
- Drivers with more than one vehicle on their policy can save up to 25 percent in annual premiums (source: Value Penguin)
Ways You Can Save on Auto Insurance
Determine the Coverage You Need
Only purchase the coverages you need to curb costs. This means skipping the unnecessary add-ons, like roadside assistance, if you currently have AAA or a similar service. Also, choose your level of coverage wisely – full coverage car insurance may be best if your vehicle is relatively new with limited miles. But if it’s older and you’re paying more each year to the insurance provider than they’d compensate you in the unfortunate event that your vehicle was totaled, liability coverage could be ideal. Just be sure to understand how coverages work before buying a policy to confirm it makes financial sense for you.
Shop Around for Policy Offerings
Explore your options to find the insurance provider offering the most value at a price point you can afford. Consider using Experian’s free auto insurance comparison tool to shop around and gather quotes in one sitting.
Request at least three quotes with identical coverages, deductibles and policy limits from reputable providers. Also, read reviews from past and current policyholders to get a feel for how the insurance provider does business. Finally, compare the rate quotes to par down your list to two providers, and choose the one that offers competitive pricing and exceptional customer service.
Ask for Any Insurance Discounts
Car insurance discounts are often available to safe drivers with no moving violations or accidents in recent years. You may also qualify for bundle discounts if you carry other policies through the provider. And some insurers offer a good student discount to help curb costs. Be sure to inquire about advertisements that may be available to you, despite not being advertised to the public.
Increase Your Deductible
A higher deductible generally equates to a more affordable monthly payment. Be sure to have the funds on hand, though, to pay the deductible if you have to file a claim.
Be a Safer Driver
Auto incidents are not music to your provider’s ears and could result in hikes to your premiums. So, it’s worth being a safer driver, despite not being able to completely avoid auto accidents and theft, to reduce your chances of encountering issues while on the road.
Take Good Care of Your Car
Give your car the TLC it deserves so you can keep it longer. If you’re tempted to swap it out in the near future, you should know those car insurance premiums sometimes drop over time as your vehicle ages.
Get a Usage-Based Policy
You could be eligible for a usage-based car insurance policy if you only drive short distances. The provider will charge you a base rate plus a rate per mile you drive. But you’ll have to agree to have your driving monitored to take advantage of these discounted plans.
Get Better Deals by Improving Your Credit
Better credit health could also be your ticket to more affordable auto insurance premiums. In some states, providers are allowed to use insurance-based scoring models to determine the likelihood of you filing an insurance claim in the near future. The higher your score, the less likely you are to file a claim and the lower the risk posed to the insurer.
While you can’t control how your credit score is calculated, you have power over what appears on your credit report. So, it’s worth taking the necessary steps to review your credit reports, file disputes to rectify any errors and create a plan of action to improve your credit score.
Experian helps simplify the process by offering consumers a free copy of their credit report and score when signing up for a free account. You’ll also get free credit score monitoring, Experian Boost to help improve your credit score, monthly Experian credit report updates, real-time FICO Score alerts, and so much more.
Visit the website today to learn more about Experian and to sign up for a free account.
