How Do I Get Cheap Car Insurance?

Sara: Welcome to “No Dumb Questions,” the Insurify podcast with straight talk on coverage, claims, and savings! My name is Sara, and I’m an editor at Insurify.

Julia: And I’m Julia. I’m a data journalist at Insurify.

S: We read, write, and talk about insurance all day, every day. And we know it’s very confusing. So, we’re here to help talk about all different kinds of topics to help you understand!

J: Low-key wish I could’ve had this podcast when I started here and had to dive headfirst into the deep end of everything to do with car insurance and so much more.

S: And now we know a little bit too much!

J: And, so, that’s why we’re here, talking to you. Hooray for that! So, today we are tackling one of the biggest questions we hear all the time, which is, “How do I get cheap car insurance?”

S: It’s the ultimate question.

J: Don’t we all want to know? Yeah. So, if you’ve ever stared at your bill and wondered why it’s so expensive, this episode is for you.

S: Because I know I absolutely have. So, we’re going to cover what drives your insurance costs, the types of coverage that you actually need, and some smart saving strategies.

J: Yes. And I think it’s pretty much time to get into it. So, let’s do it. Let’s go!

J: All right, before we begin, let’s break down some terms, because that’s super important to understanding your policy, what the heck is in front of you, what you’re reading. So, we are going to talk about liability coverage and full coverage, which includes comprehensive and collision. So, we’re going to get y’all feeling financially empowered, absolutely ready to save money, knowing these terms.

S: Yep. So, liability coverage is the base coverage that everyone has to have to legally drive. It’s required in every state except for New Hampshire. And if you cause an accident, liability insurance covers the other person’s car, the other person’s medical bills. It doesn’t cover any of your stuff.

J: Yes, that is super important to understand. I think because it’s kind of like the base required thing, some people are like, “Great, that’s all I need!” Not true. It’s made up of these two kind of core components. The first is bodily injury liability coverage, which, just like it sounds, is going to cover medical bills, lost wages — basically like costs associated with the damage done to another person’s person. And the other part of that is property damage liability coverage, which, again just like it sounds, is going to cover damage that you’ve done to their car or to a pole, a wall, a fence, etc. You know, someone else’s property, and pay for that damage.

S: So, just to reiterate, it does not cover your own car. It only covers the other person. So it won’t pay for any repairs, damages to you or your property.

J: Yes, and like I said, the state-minimum mandated levels are not always enough. So it is at least worth considering getting liability coverage that is more than those minimum levels. 

S: I mean, say you have like the state minimum. State minimum is like $15,000 in property damage. Say you hit a car, and you cause $20,000 in property damage. You’re on the hook for that extra $5,000. So, it’s really important to make sure that you have enough coverage, even on liability insurance.

J: That’s so true, because not everyone’s got that $5,000 in their bank account. OK. Moving on. So, the other big piece of this is full coverage, which is a step up from liability and includes liability.

S: Right. So, full coverage is not required by law, unlike liability. And full coverage includes liability plus comprehensive and collision coverage. Although it isn’t required by law, if you have a lease or a loan on your car, your lender might require you to have it.

J: A lot of people do end up having full coverage for that reason, I feel like.So, to kind of get into what exactly those are. So, collision coverage pays for your car. If you crash into another vehicle or object, it’s basically going to cover the damage to your vehicle.So what that means is that even if an accident is your fault, that coverage still kicks in and will cover the damage to your vehicle. And it’ll even cover the damage if you crash into a telephone pole.And then comprehensive, which is the other key part of full coverage, covers kind of just about everything else. Kind of like it sounds, right? It’s comprehensive. So that could be theft of your vehicle, could be a fire that, you know, damages your vehicle, could be vandalism, weather events, like hail damage, flood damage, things like that. And, like you said, it is typically optional unless your lender or your lease requires it.

S: So basically full coverage covers your car plus the liability. Liability insurance does not cover your car. 

J: That is so important to understand.

S: And so another common coverage that you may see is uninsured or underinsured motorist protection. So this protects you if you’re in an accident and someone doesn’t have car insurance or doesn’t have enough car insurance to cover all the damages. Some states do require this one.

J: And there are actually some other requirements that you may see depending on the state that you live in. That could be medical payments coverage, which would cover medical bills and injuries, and personal injury protection, which, like it sounds, covers your injuries. Also called PIP, if you ever see that: P-I-P.

S: So it’s important to match the coverage to your situation.

J: And that is a tricky one. And it really is individual. I think, you know, that’s part of why we wanted to do this podcast and talk about this, because, you know, it’s really not a one-size-fits-all kind of situation.So yeah, you know, if you have an older car, you’ve paid it off, and you can afford to replace it — and it’s cheap to repair — then it might be totally fine for you to just get liability coverage, which would seriously reduce your monthly insurance costs. But if you have a newer car, an expensive car, or if you don’t and you just can’t afford to replace your car, it might be worth it to get full coverage so that you have that security in place even if it comes at like a higher monthly cost. But again, this will really vary from driver to driver.

S: And so knowing what each coverage is can really help you make those important financial decisions, because you don’t want to overpay for what you don’t need. And, at the same time, you don’t want to be undercovered so you’re on the hook for big bills. 

J: The balance, the balance is so hard! 

S: The balance is so important.

J: OK. So, now that you’re equipped with the vocab, let’s get into talking about getting cheap insurance.

S: Let’s do it.

S: OK. So, since we know the basics, let’s talk about getting cheap car insurance. Shopping around is probably the best way to get the cheapest coverage, because every insurer weighs different factors differently. So, it’s important to compare multiple quotes. Like, when I was shopping for insurance, originally I was going to try and get car insurance through my renters insurance company, because I thought, like, a bundling discount, that could save me a lot of money. But when I called, even with all the discounts included — even with optional coverages eliminated — I still got quoted over $300 a month for full coverage. Too much! So, I decided to do a little bit of comparison shopping. And I ended up getting a quote that was around $250 for full coverage, and it’s still a lot of money. But for right now, that works for me. And then when my policy is up in a couple months, I’ll do some more comparison shopping and see if I can get a better deal.

J: That is so important. And even though, yeah, that’s still expensive, you saved, what was it, like $100?

S: Yeah. Almost $100 a month.

J: Almost $100 a month. Which, that adds up! 

S: That really adds up. 

J: That’s not small. So, I love that. So, another way that you can save — if you do want to maintain that full coverage on your car, right — is to consider increasing your comprehensive and collision deductible, which is that amount that you pay out of pocket when you file a claim, like before your insurance coverage kicks in.

S: Right, so, let’s say you have a $500 deductible. If you get into an accident and you file a claim, you have to pay that $500 before your insurance will come in. 

J: So, that’s really important, because your budget really matters there. You need to kind of know what you’re comfortable paying up front if something were to happen. So yeah, if you’ve got the savings, choose a higher deductible. You know, you will save money on your monthly costs, but it means that you will have to kind of pay up at that point if that happens. So, it’s important that you have that money to cover it.And it can lower your monthly premium, so we love. But a higher deductible could be risky if you can’t afford it. So, just keep that in mind, and weigh those pros and cons.

S: And, also, it’s worth noting that liability insurance doesn’t require a deductible. So another really great way to save, though, is to look at discounts. So, multi-car, safe driver, good student, taking a defensive driving course, installing anti-theft devices — all that stuff can help you save.

J: Yes. And my personal favorite discount — you’ll hear it all the time in commercials, I feel like — is bundling, which basically means insuring, like, having multiple insurance policies with one insurance company. So yeah, bundling your policies can really save you a bundle! But that means renters, homeowners insurance, pet insurance.

S: Yeah.

J: And if you bundle that with your auto insurance and buy everything from the same company, you can save kind of anywhere from like 7% to 25%. Literally a quarter off your bill.

S: Yeah, it’s a lot. So, it’s an important one to consider. And it’s also really important to ask your agent what discounts you qualify for, because not everyone lists them on their websites or when you’re getting your quote. So, it’s worth asking. Another money-saving option is pay-per-mile insurance. This is kind of a newer version of insurance. Basically, you pay a very low monthly fee, and then you pay a per-mile rate. So, it’s suited best for, like, remote workers, if you take the train, if you walk, if you bike. The average American drives between 12,000 and 13,000 miles per year. So, if you drive less than that, pay-per-mile might be a good option.

J: Anyone who has kind of generally low mileage, right? That’s probably going to be a good fit.

Another one that’s pretty similar, because it’s kind of like tracking, is a telematics program, or it’s another form of what we call “usage-based insurance.” So basically, what that is going to do is track your driving behavior. That could be your braking, your speed, your phone usage, and then calculate your rate based on that behavior. And each insurer will do that a little differently, so it’s important to keep that in mind. But that means that avoiding risky driving behaviors can end up saving you money. And there are often sign-on discounts for that. I feel like I’ve seen a lot of like “10% if you sign up” for this. You know what I mean? So, it’s a good thing to keep in mind.

S: On the other side of the coin, though, if you do engage in risky driving behaviors, like, it will end up raising your rates. So, that one’s a big pro and con about, you know, what’s best for you.

J: It’s important to think about all of it. And finally, it’s really important to make sure you avoid lapses in coverage, which is basically, like, any time spent uninsured between policies.So, you know, if you’re wanting to save money by basically canceling your insurance, even a short gap in coverage can look bad to insurers, and your rates will spike. And also, it’s illegal to drive uninsured. So, it’s maybe a good idea to think about, like, again, could you increase that deductible if you’re not going to be driving as much? Like what are the other strategies you could take to avoid that lapse but still save on your premiums? 

S: So, overall, compare rates, look for discounts, look at increasing your deductible, and avoid lapse in coverages. All right. Let’s talk about some frequently asked questions.

J: Let’s do it.

J: All right. It’s time for some questions that we get asked all the time!

S: Hard-hitting question: How much does car insurance actually cost?

J: That is so hard-hitting. It hits hard. So, according to Insurify data, the national average cost for full coverage is $182 a month, and liability costs $103 per month, on average. But really keep in mind, everyone’s rates are different. So many factors go into this.

S: So, really big cost differences between the coverages. So, speaking of factors, what factors actually go into determining your car insurance rates? 

J: Oh my gosh, so many things. OK. Your driving history is probably one of the biggest ones. That means, you know, your record, right? Like, have you had a record of safe driving? Do you have a speeding ticket or a DUI on your record? That will tell the insurance company a lot about your personal risk. Another one is location, where you live. Do you park your car on a busy New York City street, you know what I mean? Or in like a rural town? That also speaks to the risk of an accident. Is someone going to hit your car when they’re driving by? You know what I mean?And the type of car you drive. I think, you know, if you’re driving an older car, maybe there are a lot more, like, aftermarket parts, super easy to repair. That can often be cheaper than a newer car that has a lot of sensors and things that can improve safe driving but still do make the car more expensive to repair.And then also in most states, insurers can also factor your credit history into your car insurance rates. So, that can be actually another way to save, is to kind of keep that strong if you’re able. And, of course, your age. It’s more about driving experience than the age as a number. But, you know, teens are going to pay more — they’re brand-new, fresh drivers, right? — than when you’re like 40, 50, you’ve been doing this a minute. That’s usually when your car insurance rates are most affordable.

S: Unfortunately, studies do show that younger drivers engage in more reckless behavior. And so the rates are higher to compensate for the possible risk. But every single year after you turn 25, you should see those rates start to go down. 

J: And yeah, like you said, the first few years are the worst. They’re just the worst for rates. It’s pretty hard to, you know, it’s just they’re like, “Sorry, you’re risky based on the data.” So even if you drive safe, you might still have a lower rate than you might’ve, but you’re just considered more higher-risk. But in general, as long as you have a clean record, rates go down at 25. So hang on.

S: Hang on, guys. You got it!

J: And, like I said, they continue to go down until you’re much, much older.

S: And so teen drivers can save if they stay on their parents’ insurance because their parents are experienced drivers and, you know, have less risk. And it’s also, like, you can’t get your own insurance until you turn 18 anyways, without a guardian’s consent.

J: OK. Next question. So how much car insurance do you actually need?

S: OK. Great question, if I do say so myself. So you’re going to start off with your state’s minimum. You can check that on your state’s website. And then, like we said, your minimum might not be enough protection. So then we go to the next step. It really depends on your car.

J: So newer car, high-value car, you simply have a loan or a lease, you’re going to want full coverage. Yeah. Or you might need to have it.

S: Yeah. So you also need to be able to pay off your loan if your car is totaled. So, you might also want to consider gap insurance. That quite literally fills in the “gap” between how much money you owe on your car and how much it’s worth, because cars depreciate in value. So, if it’s totaled, your insurer will pay out the depreciated value. If there’s a gap in your loan, gap insurance comes in. 

J: And really just consider, kind of like I was saying earlier, re: budget, right? Like, can you afford to buy a new or just a new-to-you car, right? It doesn’t have to be brand new. Even if your car is older and paid off, consider full coverage if you can’t buy a new car. And I’ll just, I guess, share: So my car actually is completely paid off. She’s as old as the hills. She’s a 2010 model. She’s got 130,000 miles on her, and she’s still kicking. Yeah, we take care of her. It’s OK. And I could absolutely get away with liability insurance, you know, like I’m not, if I were to sell this car, I’m not going to make lots of money on it, you know what I mean? But I live in the city, and I park on the street. I don’t have a garage, which is risky. My car has actually been hit by a truck trying to make it around a too-tight corner before, on those city streets. And I can’t afford to get a new car. And, you know, there are other modes of transport available to me.So for me right now, with my budget, my level of risk, full coverage is the best choice, because it’s fairly affordable also for my older car, and it’s worth it to me to have that protection. You know what I mean? So that’s why we go with full coverage. 

S: So it really depends on the car, depends on your situation, and the level of risk you want to take on, as well as, you know, your financial obligations.

J: All right. Insurance is confusing. We know this. 

S: Yes, we do. 

J: So let’s do some rapid-fire myth versus fact. 

S: Let’s do it. 

J: All right. So, myth or fact? “Red cars cost more to insure.”

S: This is a total myth — and a very common one at that. Color doesn’t have any impact on your rates. 

J: Actually, so true. I drive, I believe the name is “paprika”-colored car, red, red-orange. And it’s definitely not more expensive to insure. But I learned that the reason that is is because so many sports cars are red. So it’s not red cars that are more to insure, but sports cars do cost more to insure.

S: Definitely more to insure. Yeah.

J: Keep that in mind. All right. Myth or fact? “Paying monthly costs the same as paying annually.”

S: So this is a myth, right? Like, paying annually is obviously a very big up-front cost, but many insurers will actually give you some sort of discount because, you know, you’ve accommodated your risk already. You’re not paying monthly. So it’s actually cheaper in the long run but more expensive up front.

J: Yes. OK. Myth or fact? “Some cars are cheaper to insure than others.”

S: Yeah, this is a fact. I mean, like, a sports car’s going to be more expensive.But if you have a car with high safety ratings, it could help you save, get you some safety discounts. Some older cars, like you said, can be cheaper to insure because they’re [of] less value. So, it’s important to factor in the make, model of your car before you buy it. 

J: So true. All right, cool. Myth or fact? “Once you find a cheap insurer, you’re set for life.” 

S: Unfortunately, total myth. Rates change literally all the time. So you want to shop around every single time your policy is about to renew.

J: Yes. That’s so important. OK. Myth or fact? “Liability coverage covers your car.”

S: Yeah. Big myth. And I think our listeners probably know this at this point. Liability coverage covers the other person, does not cover you. 

J: Yes. OK. Myth or fact? “Your credit score has a big impact on your rates.”

S: So, this is fact, but it’s not really your credit score. It’s more so your credit history. And this is not legal in every state. So, uh, just a handful of states prohibit insurance companies from using your credit history in determining rates. But basically, an insurance company will take your credit history, create a credit-based insurance score, and use that to determine rates. 

J: So, yeah, exactly. There are actually studies that show that your credit history is linked to your risk and the likelihood that you’ll get into an accident. So, that is why. But, again, there are a handful of states that don’t allow that.

S: Yep.

J: So, yeah, just like that. OK. Last one. You ready?

S: I’m ready.

J: OK. Myth or fact? “Cheap insurance is always the best.”

S: Unfortunately, also myth.

J: Devastating.

S: Devastating. The cheapest insurance can leave you with big gaps in your insurance. Like we said, if you only have liability and you only have $15,000, $20,000, you’re on that hook for that $5,000. So, it’s important to adjust your insurance for your situation. So, the best insurance is going to be at the best cost with the best amount of coverage for your situation.

J: You killed that.

S: Thank you.

J: All right. Should we get into our action plan on how to save for insurance? 

S: Let’s do it.

J: Let’s do it.

J: All right. So, here we are. We are better understanding insurance and its many relevant terms. 

S: Yes. 

J: So now it’s time for an action plan to help you start saving real money on insurance. 

S: Yes. So, you’re going to pull out your policy. You’re going to note your coverage limits, your deductibles, and any other special things, like, do you have roadside assistance? Do you want gap insurance? Do you only need liability? All that good stuff.

J: Beautiful. And the next thing you’re going to do is get at least three to five quotes. This is so important because you really don’t know the savings you could have gotten if you haven’t checked, right? So that’s why we really emphasize comparing. It doesn’t mean you need to switch your policy all the time, but just double-check that you actually have the best deal that you could have right now. It’s as easy as getting some quotes.

S: Yeah. And it truly takes like five minutes. So the next thing you want to do is, after you get those quotes, adjust that deductible to what you’re comfortable with, and see how it can affect the price of your quotes.

J: Yes, exactly. And ask your insurer about every discount you might qualify for, right? And don’t just wait for them to offer, I think, is the important piece of that. Like, be proactive. Say, “Hey, I want to save money. What can I qualify for?” 

S: Yeah, for sure. All right. And then finally, re-shop at renewal. So make sure you’re getting the best deal. Compare those quotes. Do this all over again. It’s really simple. Five minutes, and just check. And if you’re still getting the best deal, you’re still getting the best deal. But, you know, every single driver is different. Every insurance company uses different rating factors. So, it’s worth it to look to save some money.

J: Exactly. And like you’ve been saying, there are those bigger factors, right, that are changing. Even though your history or your immediate life may not have changed, other things might be shifting. That’s why you check.

S: It’s important to check. Yeah.

J: Yeah.

J: All right. So, bottom line, car insurance doesn’t have to wreck your budget, right? And affordable policies do exist.

S: Yes. Yeah. It’s like dating. Like, you’re going to go on a couple different dates. You’re not going to settle for the first one you see and just to see your options.

J: Hopefully with fewer awkward first dates.

S: One can hope. All right, that is it for today on “No Dumb Questions”! Thank you for listening.

J: Don’t forget to subscribe. And if you found this helpful, share it with a friend who’s tired of overpaying for insurance!

S: Send us your insurance questions using the form below, and drive safe and save money!