Americans are paying more for car insurance than ever before according to the 2018 State of Auto Insurance Report — current rates are 20 percent higher than they were in 2011, and rates have increased six percent within just six months. With car insurance rates continuing to increase, it’s no surprise that more and more people are searching for auto insurance discounts. We have some insight into auto insurance premiums, types of car insurance discounts and hidden discounts that can help you maximize your coverage.
How Auto Insurance Discounts Affect Your Rate
To understand how to maximize your auto insurance discounts, you need to understand how your auto insurance rate is calculated. The total amount that you pay is known as your auto insurance premium. This number is calculated by considering a base rate, surcharges, vehicle characteristics and discounts. Here’s what you need to know.
This rate is determined by your insurance company and is based on some risk factors — in other words, how likely are you to submit a claim? Some states have laws that put a limit on the information an insurance company can take into consideration when answering this question, so the information that contributes to your base rate varies to some extent based on your location. In addition to location, other factors that may be taken into account include:
- Marital status
- Credit score
- Number of years you’ve been licensed
- Amount of coverage
Once your base rate has been determined, surcharges may be added based on your driving record. Not all items on your driving record will have the same surcharge amount, but all will have some impact. Here are a few examples of issues on your driving record that would cause a surcharge to be added to your base rate:
- Speeding tickets
- Past claims
- Other traffic violations*
*Vehicle use, type, performance and value also contribute to the insurance premium
While all of your surcharges are added to your base rate, your insurer will check to see if there is any information that may reduce your potential risk. If that information is found, you’ll be matched with a discount. All discounts are subtracted from the sum of your base rate and surcharges to give you the total premium you’ll pay.
Types of Car Insurance Discounts
You may be surprised to discover that there are a variety of car insurance discounts available — in addition to the commonly known safe driver discount, there are also discounts available for everything from being a good student to paying your premium in full. All of them fall into three main categories — driver, vehicle and policy discounts.
This type of discount takes into consideration the driver — their age, location, driving history, professional affiliations, how and when they use the cars and student status. There’s a combination of reasons for these auto insurance discounts. If research is discovered that shows drivers with certain occupations and habits are less likely to submit an auto insurance claim, there’s usually a discount available.
Driver discounts are also sometimes used as an incentive — for example, students with good grades usually get one, as do seniors who complete a defensive driving course.
Within this category, you’ll find rewards for:
- Drivers without claims in the past three years
- Recent graduates
- Good students
- Military personnel
- Members of auto clubs
- Members of specific professional organizations
- Professionals in low-risk occupations
- Drivers who drive fewer miles
- New drivers who complete an accredited driver’s education course
- Drivers who complete a defensive driving course
While the driver has an impact on auto insurance discounts, the vehicle does too. Since auto insurance is all about potential risk, vehicles with features that reduce risk are often rewarded with a discount. Your vehicle may qualify if it’s a new car, hybrid car and/or has:
- Automatic seatbelts or other passive restraint
- Anti-lock brakes
- Anti-theft protection
- Alternative fuel
Every insurance company can give you discounts based on factors that might make writing your policy easier. These factors aren’t directly impacted by the driver or the vehicle.
Your insurance company may offer one or more discounts for:
- Signing up to pay your premium up front
- Signing up for auto pay
- Signing up for paperless payments
- Renewing your policy early
- Continuing to renew each year with the same insurance company
- Including multiple vehicles on one policy
- Owning a qualified home
- Combining policies — for example, a homeowner’s insurance policy and a car insurance policy
List of Car Insurance Discounts and Savings
Understanding auto insurance discounts and knowing what’s available is helpful, but how much of an impact can each of these have on your insurance policy? In some cases, the answer is up to 30 percent of your policy premium. Here are some common car insurance discounts, along with an estimated percentage you could save as a result:
- Get a discount for your affiliation with a particular employer, school or professional organization: Save 25 percent.
- Be a good/safe driver with no at-fault accidents or moving violations in the past three to five years: Save 20 percent.
- Increase your credit score by one tier: Save 17 percent.
- If you’re a high school or college student under the age of 25, get a 3.0-grade point average or higher: Save 15-25 percent.
- Stick with your insurance policy for more than one consecutive year: Save 15-25 percent.
- Raise your deductible from $500 to $1,000: Save 11 percent.
- Insure more than one car on a single policy: Save 10-25 percent.
- Get a car with anti-lock brakes: Save 10 percent.
- Take an accredited defensive driving course: Save 10 percent.
- Purchase your policy in advance, pay in full and pay online: Save 10 percent.
- Renew before your policy expires: Save 10 percent.
- Own or lease a hybrid or electric vehicle: Save 10 percent.
- If you’re under 21, take an approved driver training course: Save eight to 10 percent.
- Bundle your auto policy with home, condo or renter’s insurance: Save eight percent.
- Be a student living more than 100 miles from home: Save seven to 30 percent.
- Keep your coverage for at least six months: Save six percent.
- Keep your mileage low – 5,000-15,000 per year: Save two percent.
Remember that the car insurance discounts that are available and the amount you can save will vary based on the car insurance company. Not all companies offer all of these discounts.
How Much Can I Save With Discounts?
The list above gives you an overall idea of the percentage you may be able to save with each of these discounts. It’s important to remember that some of these discounts apply to only part of your policy. Remember, an auto policy is made up of a few different types and levels of coverage. While some discounts will be applied to the entire premium, others will be applied only to a specific part.
In addition to the details of where the discount is applied, many insurance companies will place a limit on the total discount percentage you can have on your policy. For example, you may qualify for several discounts, but be restricted to discounts that will save you a combined 25 percent on your policy premium.
Your location also has a significant impact on the amount you can save — and it’s easy to see why. According to the 2018 State of Auto Insurance Report, auto insurance rates vary widely across the United States — with Michigan being the most expensive with an average annual premium of $2,610 and North Carolina being the least expensive with an average of only $865. With that large of a gap in average premium costs, the discounts go further in some locations than others.
Tips to Get the Best Car Insurance Discounts
If you’ve been searching for “hidden auto insurance discounts,” you’ve come to the right place. In addition to the list of specific discounts above, we’ve also included some tips to get the best car insurance discount. These tips are meant to give you the background knowledge you need to begin searching for auto insurance discounts.
Shop Your Policy
It’s also important to remember to shop around when your circumstances change. Ask what the change in price will be to your current policy, and then see what other insurance companies are offering for similar coverage.
Be Wary of Spending Money to Get Discounts
You’ll notice in our list of car insurance discounts and savings that there are a few you could spend money to get. For example, you might consider joining a professional organization — or adding an anti-theft device — to get a discount on your insurance.
We won’t say these steps are never worth it, but we will say they’re rarely worth it. If it’s something you wanted to do or add before you knew there was a discount for it, then it might be a great idea. But if you’re considering spending money on an expensive add-on to get the discount, usually it doesn’t make sense.
Keep Your Eye on the Bottom Line
While discounts can significantly impact your bottom line, it’s important to remember that there’s more to auto insurance than auto insurance discounts. What matters most is getting the coverage you need at a price you can afford. You could have more discounts with one company, but another could give you a lower final price. Your premium cost is what ultimately matters — if you can get to a more affordable cost without as many discounts, the discounts don’t matter.
Also, be mindful of discounts that are offered as a bonus to switching insurance companies — they’re great, but chances are, they won’t last forever. Make sure you ask questions so that you’re aware of expiration dates that may be associated with any of the discounts you would be getting.
Save When You Pay Upfront
If at all possible, always pay for your premium up front for a six month or full-year period. When you make payments once or twice per year, instead of once per month, you’re sure to see savings regardless of which auto insurance company you choose.
Make Sure You Get the Coverage You Need
Each state’s requirements for auto insurance coverage are different. Regardless of what the minimum amount of coverage is, usually minimum coverage means minimum protection. Make sure you understand the terms of your insurance policy — what’s covered and what’s not. While the premium may cost a little bit more, it’s nothing in comparison to the financial burden that comes as a result of not having the coverage you need.
Compare Quotes Quickly but Carefully
When you’re searching for a new auto insurance quote, you’re usually in a time crunch. Move quickly, but don’t let speed get in the way of assessing all of your options.
Make sure you know exactly what coverage you currently have so that you can be sure you’re comparing apples to apples. Begin by searching for reputable insurers — do your homework to make sure the insurance companies you’re getting quotes from are rated highly. The last thing you want to do is get an affordable price and be left alone when you need support with a claim.
As you compare quotes, focus on coverage, exclusions and deductibles. When you’ve found a few that offer the same amount of coverage, with comparable exclusions and deductibles, give them a call, and go through our list of car insurance discounts to see if they offer any that could save you even more.
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