In recent months, car insurance prices have surged, and they're expected to keep climbing. In its State of Auto Insurance in 2023 report, ValuePenguin projected that car insurance rates would go up by 8.4% across the U.S. this year, which it notes is "the biggest jump in car insurance costs in the past six years."
Why the increase? "Inflation has possibly had the biggest impact," according to insurance company Progressive. There are other factors at play as well, such as frequent and more costly vehicle repairs and replacements, as well as an uptick in the number of accidents, which leads to more insurance claims.
Per ValuePenguin's report, the national average cost for full coverage car insurance now sits at $1,780 annually, though rates can be significantly higher or lower depending on where you live. However, there are ways you can save.
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1. Bundle your car insurance with other coverage
One way to save on auto insurance is to bundle it with your homeowners or renters insurance. Often, insurance companies will offer discounts to those who have multiple policies with them. A "bundling discount (also known as a multi-policy discount) can reap savings of 5% to 25%," according to Forbes.
Before you jump on this deal, however, shop around for a few different quotes and crunch some numbers, as "bundling doesn't always give you the cheapest rates on your policies," said CNBC Select.
2. Shop around to find the best deal
It's important to get quotes from a few different insurance companies, because "prices vary from company to company," said Insurance Information Institute (III).
Get "at least three price quotes," said the III, and consider getting those quotes "from different types of insurance companies," such as one that sells through its agents and another that sells direct-to-consumers online. Pay attention to a company's financial health and customer reputation.
Also, take into account car insurance costs before you purchase a new car, as different cars carry different insurance costs. "Insuring a 5,000-pound, top-of-the-line vehicle can be more expensive than insuring a small but safe lower-cost commuter car," said Investopedia. Insurers might extend a discount for buyers of hybrid or alternative fuel vehicles.
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3. Look out for any discounts
There are many different types of discounts are out there. Here's a look at the discounts you may be able to take advantage of to lower your car insurance costs:
- Discounts for low-mileage drivers: If you don't drive all that much, you could qualify for savings on your car insurance. The exact definition of "low mileage" varies depending on the insurance company, but "people who drive fewer than 7,000 to 10,000 miles per year generally qualify," according to CNBC Select.
- Discounts for safe drivers: Drivers who go "a certain amount of time without an accident or a traffic violation" may earn a discount "of anywhere from 10% to 40%" off their car insurance, Forbes reported.
- Discounts for good students: Getting good grades can do more than just help you get into college — they might also reduce car insurance costs. "Some insurers extend discounts ranging from 8% to 25% to a full-time high school or college student who's age 16 to 25 and earns at least a B average," Forbes said.
- Discounts for multiple vehicles: If you have more than one vehicle, consider getting them all covered by the same insurer. This could lead to a discount of up to 25%, according to Forbes.
- Discounts for new (and safe) cars: Having a new car, as well as a car that's decked out with the latest safety features, can also help you to pay less for car insurance. If your car is less than three years old, for example, you could save 10% to 15%, per Forbes.
4. Set up automatic payments
Another way you might secure a discount is if you set up autopay. Those who pay their policy on a monthly basis "can receive a discount for setting up automated billing from your bank account or credit card," explained Progressive.
5. Pay upfront and in full for your policy
Or, if you can afford to do so, you might consider paying your car insurance in one lump sum upfront rather than making monthly payments. "Many insurance companies charge a fee for dividing your insurance premium into monthly payments," said CNBC, so paying in full upfront "could save you as much as 12%."
6. Improve your credit score
Many (though not all) car insurance companies consider your credit score when determining your car insurance rates. As such, improving your credit score could allow you to secure a more competitive rate.
"Paying your bills on time and avoiding maxing out your credit cards" will help, said The New York Times recommends, as will limiting "the number of new credit card accounts you open and loans that you take out."
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week.
