Auto Insurance 101: How to Save Money on Rising Auto Insurance Premiums

Auto insurance is both an important financial tool to cover the risk of injury and property damage that comes with getting behind the wheel and also a government requirement for every driver in every state except New Hampshire. But, with premiums rising rapidly over the last few years, drivers are feeling the strain and looking for ways to save money.

Below are ways for consumers to reduce their cost of auto insurance, as well as some of the changes to laws and regulations that will help to make insurance more affordable for everyone.

Understand Your Coverage 

At its minimum, auto insurance covers damage or injury you cause to others (this is called liability coverage). Depending on your policy, it can also cover damage to your car caused by hitting another car, and damage to your car caused by incidents like thieves, vandalism, hitting wild animals, fallen trees and branches, and hail. In several states drivers are required to buy insurance that covers medical expenses and lost wages for you and your passengers (this is called personal injury protection, also known as no-fault insurance). But every state except New Hampshire requires some level of liability coverage, and driving without it could lead to fines, license suspension, or even jail time.

7 Tips to Save on Auto Insurance 

1. Shop Around: Auto insurers calculate premiums differently based on a range of factors, some of which have to do with your driving history and others that are unrelated to how you drive, such as your job title, marital status, whether you went to college, your ZIP code, and your credit score. Companies do not use the same algorithm or even the same set of factors to determine your premium, so comparing quotes from multiple companies will help you get the best deal. Online tools and websites can help, but don’t rely only on them—reach out to agents or the companies directly for a more complete picture. And just because your insurer promises you a loyalty discount for sticking around, don’t hesitate to get quotes from other companies. You may find that your loyalty savings does not outweigh the fact that other companies can beat the final premium that your current insurer charges you.
2. Evaluate Comprehensive and Collision Coverage: If you own your car outright, consider whether it’s worth keeping these coverages, especially if your automobile is older. Comprehensive coverage covers damage to your car from non-collision events like theft, vandalism, fire, hitting an animal (which is a collision, of course, but that’s the way it’s covered), or natural disasters. Collision coverage covers repairs to your car after a collision with another car or an object like a tree or fence or if you crash into someone else and it is your fault. If your car’s value is less than 10 times what you pay annually for these policies, consider dropping them. (Word of warning: if you drop these coverages, you will have to pay the costs to repair or replace your car if you damage it in a crash or it is stolen or damaged in a storm, so always consider that risk before dropping coverage even if your car is old.)
3. Check Your Credit Score: Unfortunately, insurers often charge people higher premiums based on their credit scores. This means drivers with fair or poor credit wind up paying hundreds or even thousands of dollars more. (CFA is working to stop insurers from being allowed to do this.) Check your credit report for errors—mistakes happen more often than you think! You can get a free copy of your credit report online, and if you see any errors, reach out to your auto insurers and ask them to recalculate your premium. Over time, focus on improving your credit score—it will help lower your premium. Also check out the many credit score-focused resources available on America Saves’s website.
4. Update Your Driving Habits: If you are driving less due to remote work, retirement, or a new job, let your insurer know. How much you drive is a key risk factor, and lower mileage could qualify you for a reduced premium.
5. Take a Defensive Driving Course: Many insurers offer discounts for completing a defensive driving course, even if you have a clean driving record. The courses can often be taken online and may lead to significant savings.
6. Pay in Full: If possible, pay your premium upfront instead of in monthly installments. Many insurers charge hefty installment fees, and paying in full can save you anywhere from tens to hundreds of dollars over the course of your insurance policy.
7. Search for Discounts: Ask your insurance company what discounts they offer. You may qualify for discounts based on factors such as being a student with good grades, having an anti-theft device in your car, having a paperless insurance policy, or setting up automatic payments. Remember to ask if you qualify for savings based on your job or military status—that can get you yet another discount.

The Need for Systemic Reform 

While these tips can help you save, long-term change is needed to make auto insurance more affordable. Here’s what the Consumer Federation of America is advocating for in auto insurance: 

1. End the Use of Socioeconomic Factors: Your insurance premium should be based on how you drive, not your credit score, job, marital status, gender, or education level. 
2. Stricter Rate Regulations: States should require insurance departments to approve rate increases, ensuring that consumers are protected from arbitrary hikes. 
3. Low-Cost Auto Insurance Programs: Programs like California’s offer affordable, basic coverage for good drivers, helping ensure everyone can stay insured. For example, in September 2025 63,000 Californians were enrolled in the program, paying about $400 a year on average for coverage.

Auto insurance is essential for both financial security and staying on the road. By being a smart shopper and informed consumer, you can save money and protect yourself from overpaying for coverage. 

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For more tips on how to save money, reduce debt, and build wealth, visit the America Saves Resource Center here.

To see how the Consumer Federation of America is advancing the consumer interest through research, advocacy, and education, click here.