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The average car insurance premium in 2021 was $1,950.96, car insurance marketplace Gabi®, a part of Experian, reports. Fortunately, insurance companies offer discounts for everything from safe driving to good grades. Keep reading for car insurance discounts that can save you money.
What Determines the Cost of Car Insurance?
Insurance companies consider several factors when calculating premiums, including:
- The amount and type of coverage
- Your deductible: This is the amount you must pay toward a claim before your insurance company kicks in
- The type, value and age of your car
- Demographics such as your age, gender and marital status
- Your driving record, including moving violations and accidents
- Where you live: Drivers in some areas are statistically more likely to file claims
- Mileage: Driving more increases the odds of accidents
- Your insurance history, such as claims filed or gaps in insurance
Discounts That Can Save You Money on Car Insurance
Car insurance discounts fall into five general categories:
1. Vehicle-Based Discounts
- New car discount: New or newer vehicles may get discounts. Geico says new car drivers enjoy 15% savings on average.
- Alternative-fuel discount: Many companies offer discounts for alternative-fuel vehicles like hybrids and electric cars; Farmers Insurance claims savings of up to 5%.
- Anti-theft or safety device discounts: Factory-installed safety and anti-theft equipment such as anti-lock brakes, airbags, alarms and tracking systems can earn discounts. Esurance says such devices can save 2% to 25% on certain coverages.
2. Payment-Related Discounts
You may get discounts by paying your annual premium upfront, enabling automatic payments or going paperless. For instance, USAA customers using automatic payments save up to 3%.
3. Purchase-Related Discounts
- Online discount: Instead of contacting an insurance agent, save money by shopping for insurance online. Progressive offers an average discount of 4% for starting your quote online and another 8.5% for accepting and signing documents online.
- Bundling discount: Purchasing multiple policies from one insurer (or bundling) is a popular way to save. Progressive says new customers save an average of $1,000 annually by bundling home and auto insurance.
- Multi-car discount: Like bundling, insuring multiple cars with one company typically garners a discount.
- Loyalty discount: Sticking with your insurance company can pay off. AAA says customers save up to 5.6% by maintaining at least one year of continuous auto insurance.
4. Driving-Based Discounts
- Safe driver discount: Since good drivers are less likely to file claims, many companies reduce premiums if you go a certain number of years without accidents or moving violations. At Geico, five years accident-free earns discounts up to 22%.
- Driver's education discounts: Teenagers and seniors may get discounts by taking safe driving classes.
- Driver tracking discounts: Using the insurer's safety apps or in-car devices to monitor your driving can reduce premiums. Nationwide customers using the SmartRide app get 10% off when they sign up and can save up to 40% when their policy renews.
- Low mileage discounts: Driving under 10,000 or 12,000 miles a year can lower premiums. Some companies even offer pay-per-mile auto insurance, charging a base premium monthly, plus a charge for each additional mile.
5. Demographic-Based Discounts
- Affiliation discount: Car insurance companies often offer discounts for members of organizations, such as fraternities, alumni associations, employees at certain companies, or military service members. For example, Geico offers qualifying active or retired federal employees up to 12% off.
- Homeowner discount: Buying a home demonstrates financial stability that can earn a discount. Progressive offers an average 10% discount even if your home isn't insured with them.
- Senior discount: Many insurance companies discount your insurance at age 55, when drivers tend to be more cautious. (After age 70, premiums generally rise.)
- Student discount: High school and college students with good grades can save. State Farm says good grades earn discounts up to 25%. Being away at school and not driving can also get discounts. At AAA, students over 100 miles from home without vehicles save up to 46.7% on select coverage.
Insurers may not offer the same discounts in all states. While some discounts are automatically included in your quote, others you'll have to ask for.
Other Ways to Save on Auto Insurance
Try these steps to lower your premiums even more.
- Change insurers. Before your policy renews each year, shop around online or via an insurance broker for a better rate.
- Reduce coverage. Standard auto insurance includes collision and comprehensive coverage, which cover vehicle damage or loss and are limited to the car's value. If your car is older and not worth much, consider dropping them.
- Eliminate extras. Drop extras you may not need, such as roadside assistance or rental car coverage.
- Increase your deductible. Raising your deductible usually lowers your premiums, assuming you can afford the higher deductible.
Can Good Credit Help You Save on Car Insurance?
Most states let insurance companies consider credit-based insurance scores when setting premiums. Insurers use these scores to predict whether you'll pay premiums on time or file a claim.
Checking your regular credit score can give you an idea of your credit-based insurance score, which is based on similar information. And the actions that can improve your credit score, such as paying bills on time, paying down debt and not applying for new credit, can boost credit-based insurance scores. Whatever your credit score, the Experian auto insurance marketplace can help you find the lowest rates.