The average auto premium for medium sedans is $1,245 per year, AAA data shows. That’s a decent chunk of Americans’ budgets every year—and if you are looking to save on car insurance, there are some caveats you should keep in mind.
First, how much auto coverage you have matters, too. The best coverage for you doesn’t necessarily come with the cheapest rate. It’s just as important to be adequately covered in case your car is damaged, stolen, or worse, if you get into a bad wreck.
Once you know how much coverage to buy, one of the best ways to find affordable auto insurance without giving up quality coverage is to compare rates and look for discounts at multiple companies. It could save you hundreds of dollars a year.
We’ve sifted through relevant information and data and compiled a list of the cheapest car insurance companies. We chose these companies because of their low rates and discounts, as well as other key factors, but there may be better options depending on your circumstances and where you live.
Before You Start
To determine our picks for the cheapest car insurance companies, we started with a list of 25 largest car insurance companies by premiums collected, based on data from the National Association of Insurance Commissioners. From there, we applied a series of filters to narrow the field — like customer satisfaction and discounts — but placed more of an emphasis on cost.
Our top picks all offer at least five discount programs, which are a key way in which premiums can become more affordable for people.
To gauge affordability, we looked at Bankrate’s average annual premium across these carriers and eliminated any with an average yearly cost of more than $1,350 for full coverage.(Bankrate, like NextAdvisor, is owned by Red Ventures.) Next, we looked at J.D. Power’s 2020 U.S. Auto Insurance Claims Satisfaction Study, and ruled out any companies that scored below 850 on a 1,000-point scale (the industry average was 872).
Finally, we looked at each insurance company’s A.M. Best rating, which evaluates a company’s financial standing. Financial solidity matters for insurance companies because their customers depend on them to pay their claims if they’re in an accident or experience some sort of insured loss. In other words, an insurance company that has the wherewithal to stay in business is more dependable in the long term. We ruled out any company that doesn’t have an A.M. Best rating of A+ or higher. We also eliminated any companies that are involved in any active fraud investigations.
USAA is a multi-line insurance company that offers auto insurance, life insurance, and property insurance but only for certain customers: active military members, their families, and veterans. Based in Texas, it was founded in 1922 by 25 Army officers who came together to insure each other’s vehicles. It has grown tremendously since, serving over 13 million members. This military-centric insurance company claims to have a nearly 96% member retention rate.
Average annual premium for full coverage: $1,225
Savings with this insurer: USAA has over a dozen deals and discounts for its policyholders. Customers can save up to 10% on their homeowners or renters insurance premium when they add auto insurance, get reduced rates for low annual mileage, and get up to a 60% discount for vehicles stored during deployment. It claims that its members save an average of $707 per year on their auto premium when they switch to USAA. According to J.D. Power, it has one of the highest claims satisfaction ratings,right behind Amica.
Erie Insurance is a regional company that competes with much larger ones. Based in Pennsylvania, it’s been around since 1925, but only offers auto insurance, property insurance, life insurance, and other types of insurance in 12 states — Illinois, Indiana, Kentucky, Maryland, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, Wisconsin — and Washington D.C. It has more than 5 million insurance policies in force. But you can only buy insurance through its network of 13,000 independent agents, not directly from the company.
Average annual premium for full coverage: $1,233
Savings with this insurer: Erie Insurance not only has one of the cheapest annual premium rates for full coverage of the bunch, but it also offers a host of discounts for its auto policies. For starters, you can save anywhere between 16% to 25% if you insure multiple cars or have multiple policies with Erie. It offers accident forgiveness after you’ve been a customer for three or more years, meaning your rate won’t go up the first time you’re at fault in an accident. Additionally, your deductible can be reduced by $100 for each consecutive year in which you don’t file a claim — up to a maximum of $500.
Travelers is the 10th-largest auto insurer in the U.S. but only makes up roughly 2% of the market. The company was founded in St. Paul, Minnesota in 1853 and is now headquartered in New York City. It offers a wide variety of insurance options, from auto to homeowners coverage, and bond and specialty insurance, such as identity fraud expense reimbursement. Its insurance products are available in 43 states in the U.S., Canada, Ireland, and the United Kingdom, and can only be purchased through an independent agent.
Average annual premium for full coverage: $1,325
Savings with this insurer: Travelers has a slightly higher annual premium rate for full coverage than Erie Insurance and USAA, but it’s still low compared to the rest of the industry. This company offers 12 different discount programs to customers. It has typical discounts that you see with other insurers, but a few stand out. For example, Travelers offers a discount for simply owning or leasing a hybrid or electric car. Its multi-policy discounts lets you save up to 10%, easily making it an affordable one-stop-shop for car, home, and life insurance.
Auto-Owners Insurance has been included as an honorable mention on this list because its average annual premium is only slightly above our standard of what’s considered a low rate, and the company excels in several other categories, like auto claims satisfaction and discounts.
Founded over 100 years ago, Auto-Owners is a Michigan-based mutual insurance company that offers auto, home, and life insurance. It offers insurance in 26 states to nearly 3 million policyholders. You can only buy Auto-Owners insurance from one of its 48,000 licensed independent agents.
Average annual premium for full coverage: $1,351
Savings with this insurer: Auto-Owners has some of the lowest rates in the market. You can lower your car insurance costs even further by taking advantage of their discounts. The company claims you could save up to 20%, or even more when discounts are combined. The discounts that Auto-Owners offers for policyholders range from discounts for students and safety features to discounts for paying your premium on time and in full. On top of that, it has the highest rating in claims satisfaction, according to J.D. Power.
Insurance companies are willing to sell you all types of auto coverage, but you should never spend more than you have to on car insurance.
“Insurance companies aren’t going to do everything they can to make sure you’re getting the lowest rate possible,” says Laura Adams, an insurance expert and host of the “Money Girl” podcast. “You have to ask for it, and just be a savvy consumer when it comes to paying less for auto insurance.”
Here are a few tips to get good coverage at the lowest possible rate.
1. Look for Discounts
Getting a discount on your auto policy is a really popular and easy way to lower your premium. Most insurance companies offer discounts, although they vary from company to company. There are some discounts that all of them offer, like bundling or loyalty discounts, but there are some that may be unique to a specific company. So when you’re shopping, you want to make sure you’re being proactive and asking about all the discounts you qualify for.
“Discounts are huge, but consumers have to ask about them,” says Adams. “It’s kind of up to us.”
Another strategy to lower your premium is to increase your deductible with your comprehensive and collision coverage. But that only makes sense if you’re not driving often or you’re comfortable with owing more out of pocket if you file a claim. Your deductible is an aspect of your auto policy that you can change anytime — unless your specific insurer says otherwise. So, you can always start with a number and adjust as you go to meet your needs.
Having enough auto coverage is important, but there can be a fine line between too little and too much. You should never opt for less coverage just for the sake of cheaper insurance. But sometimes, it makes sense to drop certain types of coverage, like collision and comprehensive insurance, if your car is older and has a low market value. Sit down and evaluate every year what to keep and what to cut in terms of coverage because your needs may evolve and change over time.
Your credit score can play a role in your car insurance premiums, depending on where you live. Some states, like California, Hawaii, Michigan, and Massachusetts, don’t allow insurance companies to take credit scores into consideration when setting rates. Keep in mind that insurance companies also use many other factors to come up with your rates, not just your credit score. If you live in a state where insurers can pull credit scores before offering you coverage, make sure your credit score is in a healthy state. If it’s on the lower end of the spectrum, you can always improve your credit score.
Insurance companies prefer to insure safe drivers who don’t have a lengthy history of car accidents or tickets, because they’re less likely to file a claim. If your risk for accidents is low, your rates are more likely to stay low, too.
There are a few ways you can get cheaper car insurance. One of the best ways you can save on auto insurance is by asking your insurer about discounts. Many auto insurers offer discounts for car safety features or bundling two or more types of insurance. Keeping a clean driving record also works to your advantage since insurers will see you as less of a risk on the road. If you’re not driving as much during the coronavirus pandemic, you can ask your insurer to reduce your premium. Insurers reason that the less amount of time you spend driving, the less likely it is that you’ll get into an accident and file a claim.
The minimum coverage required in your state is the cheapest type of car insurance you can get. In most states, that’s liability insurance only, which covers property damage and medical bills for others if an accident is your fault. Some states require additional coverage on top of liability insurance, like uninsured and underinsured motorist coverage or personal injury protection (PIP). Check your state’s website to see the minimum auto insurance you’re required to purchase. But auto insurance is not something you want to skimp on. Experts recommend getting additional coverage, like comprehensive and collision, along with liability insurance to ensure you and your car are protected.
Car insurance companies typically charge higher rates for drivers younger than 25, according to the Insurance Information Institute (III). The U.S. Centers for Disease Control says the risk of crashing is particularly high for teenagers after the first months of getting their driver’s licenses. Research shows that older drivers tend to get in fewer accidents because they have more experience on the road. Your rates usually lower as you get older, but this also depends on your insurance company’s risk perception of you. For example, you could be well past your 20s but still have a higher premium if you’ve had several traffic violations.
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