How to Reduce the Cost of Car Insurance

Paying less for auto insurance isn’t as difficult as you might think. While some of the initial steps might require a bit of legwork on your part, others might be as simple as making a quick phone call to your insurer to let them know your auto insurance needs have changed. This section explores the top ways you can cut your auto insurance costs, including trimming extra coverage you don’t need, comparing rates among different insurers, paying up front, taking advantage of discounts, and much more. You can also use this guide to empower yourself to negotiate a better rate with your insurer.

How to Reduce the Cost of Car Insurance

Here are the five most important things to know.

1. Know the market

There is no one “cheapest” insurance company – insurance is far too complicated for that. Carriers set their rates according to how likely they think you are to file a claim, but each insurer calculates that risk differently, so the prices could vary dramatically between companies. It all depends on how they weigh risk factors. For a 45-year-old woman living in Florida, Company A might have the lowest rates, while for a 25-year-old man in Michigan, Company B will be the cheapest. It might sound self-serving, since auto insurance comparison is what we do, but shopping around is far and away the best way to save.

2. Know your discounts

Nurses, teachers, and engineers, you’re in luck! Some companies give greater weight to occupational discounts, so now’s the time to boast. Do you spend part of your workday managing inventory? You may be eligible for a manager’s discount. If you don’t have a fancy job, don’t despair. You can get discounts for experience in college (even if you didn’t graduate), your living situation (bonus points for owning a home), and taking driver’s ed. If you’re currently in school, you may even be eligible for a good student discount.

3. Know your anti-discounts

In other words, what factors are behind your high monthly premium? Most people don’t realize that the three biggest factors determining your price are your car/driving record, insurance history, and credit. Let’s tackle these one by one:

Driving Record

So maybe you played a little too much Mario Kart in the ’90s and now have four speeding tickets and a calloused thumb. Call the DMV in your state to see if a defensive driving course could reduce the points on your record. It’ll save you on car insurance for the next three years. Also, ask your agent if you have any at-fault accidents on your record. These will wreak havoc on your monthly premium. And if you think these accidents weren’t yours or you weren’t at fault, ask your insurance company for a “letter of experience.”

Insurance History

Drivers who’ve had insurance for six continuous months get lower prices than drivers buying insurance for the first time. If you don’t have prior insurance, you may be eligible for a partial discount if you’re coming from active military duty. Otherwise you’re out of luck here, but it never hurts to ask.

Credit Rating

Yes, insurance companies care about credit – they prefer customers who consistently make their monthly payments on time. And no, you can’t hide those student loans that are hurting your score. What you can do is tell the agent if you’ve moved your residence in the last six months. Oh, and make sure you provide the correct name and date of birth as they appear on your license.

Tip: "If you already have health and disability insurance coverage through your work, you can probably go without Personal Injury Protection (PIP) coverage on your car insurance. If you live in a state where PIP is required by law, you can opt for the minimum. The idea is to avoid doubling up coverage where you can."

4. Know what coverages you need

If your vehicle is paid off and not very valuable, it might make financial sense to drop comprehensive and collision – particularly if you carry a high deductible. Or, if you already belong to an auto club, the roadside assistance package could be redundant. For the vast majority of drivers, we don’t recommend carrying only liability insurance, but there are times when it’s the right move. Check out our blog post on mandatory auto insurance in your state if you only want the minimum amount allowed by law. Some coverages, like uninsured motorist coverage, come standard but can be rejected by request. As always, if you aren’t sure what you need, Goji would be happy to go over your unique situation.

5. Let your insurance company know

The insurance company doesn’t want to lower your price, but they also don’t want to lose you as a customer. If you’ve done your homework and know that you can get the same coverage for less somewhere else, it’s possible they’ll give you a better rate to keep you in the fold. But, and this is important, never cancel your policy until you have a new one in place. Lapses in coverage can increase your premium significantly, so don’t go uninsured for any amount of time if you can help it.

If your agent isn’t giving you straight answers, run! If they want you as a customer, you’ll know, so if they aren’t seeking your business, they may not be giving you the whole picture. Find someone who speaks plainly and offers you discounts, and your bank account will thank you.

Put your knowledge to use

When you’re ready to start saving on auto and home insurance, compare auto insurance quotes side-by-side to find the right fit for you. Happy saving!