If you own or lease a vehicle, every state requires you to have some amount of auto insurance. Even if you don’t own a car but occasionally drive someone else’s car or a rental, you should also have coverage called non-owner auto insurance.

Unfortunately, auto insurance is getting more expensive, and the options can be confusing. According to the U.S. Bureau of Labor Statistics, vehicle insurance went up 20.6% in the last year. That’s in addition to a big increase from the prior year of 15%!

So, how do you save money on car insurance?

So, everyone should be looking for ways to cut their car insurance premiums while staying compliant and safe. This post will review ten ways you can reduce the cost of auto insurance without jeopardizing your financial security.

What does auto insurance cover?

Here’s a review of what protections you get from an auto policy and why it’s important for your financial well-being. Auto insurance is a package of policies you can adjust based on your needs and auto lender’s requirements. Typical coverages include:

• Liability

  Pays for legal obligations if you get involved in a lawsuit and get found at fault. While mandatory, the minimum amount you must carry varies significantly depending on where you live. There’s bodily injury liability that pays legal fees, medical expenses, and lost wages. There’s also property damage liability for costs related to damaged property other than your vehicle, such as damage to a building or sign.

• Collision

  Optional and pays for damage to your vehicle when you have an accident with another car, no matter who’s at fault. It comes with a deductible, the amount you must pay before your coverage begins.

• Comprehensive

  Optional and pays for damages other than a vehicle crash, like storms, vandalism, theft, or hitting an object or animal. It has a separate deductible from collision coverage.

In some “no-fault” states, like Florida, Michigan, and New York, in addition to liability, there’s another mandatory coverage called personal injury protection (PIP). It comes with a deductible and pays for medical bills, rehabilitation costs, lost wages, funeral costs, and other accident-related expenses, regardless of who is at fault for an auto accident. PIP is optional in some “fault” states.

Protections without a deductible

In addition to those basic or required coverages, most carriers offer various optional protections that don’t have a deductible, such as:

• Uninsured or underinsured motorist coverage

  Pays when you’re involved in a hit-and-run or have damage or injuries due to an at-fault driver with no or too little auto insurance to cover your loss. 

• Medical payment coverage

  Pays for injuries to you or passengers regardless of who is at fault in an accident, but doesn’t have coverage as broad as PIP.

• Rental car coverage

  Pays you to drive a rental while covered repairs get made to your vehicle.

• Glass replacement coverage

  Repairs or replaces your vehicle’s cracked or broken windows or headlight covers without applying a deductible.

• New car replacement

  Pays for your vehicle if it gets totaled in an accident.

• Emergency roadside assistance

  Pays for towing, fuel delivery, vehicle unlocking, and other roadside issues.

States and lenders have different requirements for auto insurance types and amounts you must purchase. But that’s just one factor in how much you pay for coverage. 

Your auto premium depends on many factors, including some you control, like your vehicle’s make and model, annual mileage, driving record, and credit. But your auto rate also depends on factors you can’t control, like your years of driving experience, age, gender, and marital status.

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10 ways to cut car insurance premiums

Now that you know more about what auto insurance covers and the factors that affect what you must pay for it, consider the following ten tips to pay less.

1. Don’t pay coverage you don’t need.

Carefully assess what you’re paying for and any auto protections you may not need. For instance, if you don’t have ample savings to repair or replace your car if it got damaged or stolen, you need collision and comprehensive coverage.

However, if you have an older, paid-for car, consider reducing or dropping collision and comprehensive altogether. A good rule is to buy those coverages only if the annual premium is 10% or less of your car’s Blue Book value. Otherwise, you’ll pay more premiums than you could ever collect in benefits.

But if you have a leased vehicle or owe any amount to an auto lender, cutting collision or comprehensive coverage won’t be an option. If you cut those coverages, you’re self-insuring and should ensure you have enough savings for the added risk.

I mentioned that liability is required and for good reasons. If you were in a severe car accident, you could get sued for a considerable amount. Each state has minimum liability requirements, but you may need more.

For instance, if your state only requires $10,000 in medical costs and $10,000 for property damage liability, that may be too little to protect your assets. If you were found at fault for medical expenses of $500,000 in a lawsuit, you’d be legally responsible for paying the remaining $490,000.

So, liability isn’t an expense to scrimp on. You need enough liability to cover the value of your real estate, savings, and non-retirement investments if you get sued for hurting a vehicle passenger, another driver, or a pedestrian.

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2. Get familiar with potential discounts.

Different insurers offer different discounts, and they don’t always know if you’re eligible for them. So, ask what discounts each carrier offers and whether you qualify. Here are some standard auto discounts to watch out for:

• Multi-vehicle for insuring more than one vehicle. 
• Safe vehicle for having features such as anti-lock brakes and airbags. 
• Safe driver for having a clean driving history with no accidents.
• Good student for high school or college-age drivers who maintain at least a “B” average. 
• Occupation for working in specific fields such as the military, medicine, or teaching. 
• Auto-pay for having your premium payment automatically deducted from your bank account. 
• Loyalty for being a customer with your insurer for several years. 
• Homeowner for owning a home, even if your auto insurance company doesn’t cover it.
• Associations like being a veteran, attending certain schools, or belonging to particular organizations.

In episode 605, Money Girl covers five essential insurance tips about the protections you get from basic renters and home policies, mistakes to avoid when buying a policy, and ways to save money on premiums. Listen in the player below:

3. Take a driving course.

Many insurers offer a discount if you complete a defensive driving course. Some states, like New York, mandate an education discount, such as cutting your premium by 10% for three years. You can get a defensive driving education locally or from an online school like Aceable.com. 

4. Bundle policies with the same insurer.

Most insurers reduce premiums if you have more than one type of coverage, such as auto and home, renters, or life insurance. It’s known as a multi-line policy or “bundling.”

So, getting all your policies from one provider usually cuts your total insurance bill up to 15%, depending on the carrier. However, I still recommend shopping policies separately to ensure you get the best deal.

5. Consider pay-as-you-drive programs.  

Most nationwide auto insurers discount your premium if you authorize them to track your driving habits through a monitoring device, known as usage-based, pay-as-you-drive, or pay-per-mile programs. If you meet safe driving standards for metrics like average mileage, speed, braking, cornering, and times of day you drive, you can qualify for a significant discount, such as up to 40%.

The pay-per-mile programs can offer savings if you drive less than 8,000 to 10,000 miles a year. So, be sure your insurer knows if your driving habits change because you’re working remotely, got a job closer to home, or are no longer working.

ALSO READ: How does a DUI affect my auto insurance?

6. Increase your deductible.

A deductible is the amount you must pay before insurance benefits begin on a claim. For auto insurance, you typically can choose a deductible such as $200, $500, or $1,000. If your deductible is $500 and you have damage to your car estimated at $1,500, the insurance company will only pay the body shop $1,000.

But the higher your deductibles, the lower your premium will be. Therefore, increasing them can save money; however, the benefit of boosting deductibles varies from state to state. So, get rate quotes for different deductibles before making a change. Also, be sure you have enough cash to cover a higher deductible if you need to make an insurance claim.

7. Maintain good credit.

You might be surprised that your credit significantly influences the rates you get quoted for car insurance. In most states, insurers use credit as a tool to help gauge how risky a customer might be. Those with poor credit can pay double or triple what someone with excellent credit pays for auto insurance, depending on where you live.

So, that’s just one more reason to maintain good credit scores by paying your bills on time and managing credit accounts responsibly. If you last reviewed your credit a while ago, it’s free and easy to do at a site like Credit Karma.

8. Consult with your agent.

A straightforward way to pay less for auto insurance is to discuss saving strategies with your agent or a company representative. They want to keep your business and understand how to serve you better. So, let them review their discount list with you to see what you’re eligible for.

9. Get quotes from an insurance broker.

Some insurance agents only work for one carrier, but others are independent and can quote and sell auto policies from multiple insurers. They’ll know whether a company runs a promotion to gain new customers or offers a better discount than a competitor.

10. Shop your policy regularly.

Whether you use an insurance agent, independent broker, or online platform, I recommend shopping for auto coverage annually. Put a recurrent event in your calendar to review your options at the same time each year or even twice a year. Rates change frequently, and carriers have different criteria for evaluating you.

If you’ve never shopped your auto policy, or it’s been a while, taking a few minutes to get quotes is an easy way to save. After comparing quotes, you may find that your current insurance provider is giving you a great deal—but you won’t know until you shop.