Where the lowest rates actually come from

The cheapest car insurance is not at one company — it is the rate you get when you compare quotes from multiple insurers and pick the one with the lowest price for your specific situation. Insurance companies use different formulas to calculate risk. One insurer might charge you $1,200 a year while another charges $900 for the same coverage, because they weigh your driving record, age, location, and vehicle type differently.

You find lower rates by getting quotes from at least three to five companies, not by calling one insurer and hoping for a discount. The companies that advertise heavily on television are not necessarily cheaper — they are just better known. Regional insurers, direct online companies, and companies that specialize in high-risk drivers often have rates that major national carriers do not match.

The second way to lower your rate is to change the coverage or deductible you carry, or to bundle policies. A higher deductible (the amount you pay out of pocket in a claim) lowers your premium. Bundling your car and home insurance with the same company often saves 10 to 25 percent on each policy. But these changes trade lower premiums for higher out-of-pocket costs if you have an accident, so the math only works if you can actually afford the deductible.

Key Takeaways

  • Compare quotes from at least three to five different insurers, because the same coverage costs different amounts at different companies.
  • Raising your deductible from $500 to $1,000 or $1,500 lowers your premium, but you pay more if you have a claim.
  • Bundling car and home insurance with one company often saves 10 to 25 percent on each policy.
  • Discounts for good driving, safety features, paid-in-full premiums, and low mileage exist at most insurers but vary in size.
  • Your location, age, driving record, and vehicle type set the base rate — you cannot change those, but you can shop around because different companies weight them differently.

How to get quotes without spending hours on the phone

Most insurers let you get a quote online in 10 to 15 minutes. You will need your driver's license, vehicle identification number (VIN), and current insurance information if you have it. Start with the companies you have heard of, then add one or two smaller regional insurers or direct online companies that operate in your state.

Do not use comparison websites that claim to show you quotes from "all" insurers — they show you quotes from the companies that pay them to be listed, which is not all of them. Instead, visit the websites of individual insurers directly. Major national companies include State Farm, Geico, Progressive, Allstate, and USAA (if you are military or a veteran). Smaller or direct-only companies include Costco Insurance (if you are a member), Lemonade, Root, and Metromile. Your state's insurance commissioner's office publishes a list of insurers licensed to sell in your state.

When you get quotes, use the same coverage limits and deductible for each one so you are comparing the same thing. If one quote is much lower than the others, read the details — it may have lower liability limits or higher deductibles than the others.

Discounts that actually lower your rate

Most insurers offer discounts, but the size of the discount varies widely. A good-driver discount at one company might be 10 percent; at another it might be 25 percent. You have to ask about discounts when you get a quote, because they are not always shown automatically.

Common discounts include: good driving record (no accidents or violations in the past three to five years), safety features on your vehicle (airbags, anti-theft devices, automatic braking), paying your premium in full instead of monthly, bundling policies, low annual mileage, completing a defensive driving course, and being a student with good grades. Some companies offer usage-based discounts if you let them monitor your driving through an app — you get a lower rate if you drive safely, but a higher rate if you do not.

The discount for bundling is usually the largest and most reliable. The discounts for good driving, safety features, and paid-in-full premiums are common but smaller. Ask each insurer which discounts you may have access to for before you decide, because a company with a higher base rate might end up cheaper after discounts.

When raising your deductible makes sense

Your deductible is the amount you pay toward a claim before insurance kicks in. A $500 deductible means you pay $500 and the insurer pays the rest. A $1,000 deductible means you pay $1,000. Raising your deductible from $500 to $1,000 typically lowers your premium by 10 to 25 percent, depending on the insurer and your location.

This trade-off only makes sense if you can afford to pay the higher deductible out of pocket without going into debt. If you have $2,000 in savings and raise your deductible to $1,500, you are betting that you will not have an accident. If you do, you will have to pay $1,500 immediately, which might force you to borrow money or skip other bills. If you have $10,000 in savings, a $1,500 deductible is a manageable risk.

For collision and comprehensive coverage (which cover damage to your own car), a higher deductible is a personal choice based on your savings and how much you drive. For liability coverage (which covers damage you cause to others), you cannot raise the deductible — it is usually set by state law or lender requirements.

Bundling home and car insurance

If you own a home or rent and carry renters insurance, bundling your car and home policies with the same insurer usually saves money on both. The discount ranges from 10 to 25 percent depending on the insurer and your state. Some companies offer even larger discounts if you bundle three or more policies (car, home, and umbrella or life insurance).

To learn about bundling saves you money, get a quote for your car insurance alone, then get a quote for both car and home insurance together from the same company. Compare that bundled quote to what you are currently paying for home insurance plus the lowest car quote you found. Sometimes the bundled rate is cheaper; sometimes it is not. The insurer with the lowest car rate might not have the lowest bundled rate.

Bundling also means you have one bill and one customer service contact, which can be simpler to manage. But if one policy becomes much more expensive later, you cannot easily move just that policy without losing the bundle discount on the other one.

Why your location, age, and driving record matter most

The biggest factors in your insurance rate are things you cannot change: your age, driving record, location, and the vehicle you drive. A 19-year-old in a major city with a recent accident will pay far more than a 45-year-old in a rural area with a clean record, even at the same company. These factors set your base rate before any discounts or deductible changes.

What you can do is shop around, because different insurers weight these factors differently. One company might charge young drivers 40 percent more than middle-aged drivers; another might charge 60 percent more. One company might charge 20 percent more in cities; another might charge 50 percent more. By comparing quotes, you find the insurer whose formula favors your situation.

Your driving record improves over time. Accidents and violations typically stop affecting your rate after three to five years, depending on the insurer and your state. If you have a recent accident, you will pay more now, but shopping around still matters because the increase varies by company.

Frequently Asked Questions

Do I have to switch insurers to get a lower rate?

Not always. Call your current insurer and ask if they have discounts you are not using, or if they will lower your rate to match a competitor's quote. Some insurers will negotiate, especially if you have been with them for years. But if they will not budge, switching is usually worth it — people who shop around save an average of several hundred dollars a year.

What if I have a bad driving record or recent accident?

You will pay more, but shopping around still matters because the increase varies. Some insurers specialize in high-risk drivers and charge less than major carriers do. You may also find that a higher deductible saves enough to offset part of the increase. Your rate will improve as the accident or violation ages.

Can I get a lower rate by paying my premium in full instead of monthly?

Yes, most insurers offer a discount for paying the full six-month or annual premium upfront instead of in monthly installments. The discount is usually 5 to 10 percent. If you cannot afford to pay in full, the monthly payment option costs more but is still worth getting a quote for.

Does my credit score affect my insurance rate?

Yes, in most states. Insurers use credit-based insurance scores (different from credit scores lenders use) to set rates. You cannot see or directly improve this score, but paying bills on time and keeping credit card balances low helps. Some states limit how much insurers can use credit scores, so the effect varies by location.

Should I drop collision or comprehensive coverage to save money?

Only if your car is paid off and you can afford to replace it. If you have a loan or lease, your lender requires collision and comprehensive coverage. If your car is worth less than $3,000 to $5,000, dropping these coverages might make sense because the premium you save could exceed what you would get from a claim. But if your car is newer or you cannot afford to replace it, keep the coverage.