Car insurance discounts: How to save on your auto policy

While car insurance discounts are one of the simplest ways to lower your premium, quite a few drivers don’t realize how many of these discounts they might qualify for. For example, you could save money for things you might already be doing, like driving safely, getting good grades, bundling policies, or even just paying your bill in full.

The tricky part, however, is that discounts aren’t always automatic. And not every company offers the same ones.

Here’s how auto insurance discounts work, which types are most common, and how to make sure you’re not overpaying.

Driver-based discounts

Driver-based discounts are based on who you are and how you drive. Insurance companies set policy prices in accordance with risk. So if your history suggests you’re less likely to file a car insurance claim, you might pay less.

Here are the most common driver-based auto insurance discounts.

Safe driver discount

If you’ve gone several years without an accident or ticket, you’ll likely qualify for a safe driver discount (sometimes called a claims-free or violation-free discount). The downside is that even one traffic violation or at-fault accident can reset the clock.

Good student discount

Drivers under the age of 25 who maintain strong grades can usually qualify for a discount. Many insurers require a 3.0 GPA (or B average) or a “good academic record” as outlined in the terms and conditions.

Statistically, good students file fewer claims, which is why this discount exists. In some cases, you could save up to 25% on your policy, which can go a long way in helping you reduce the high cost of teen car insurance.

Defensive driving course discount

Completing a state-approved defensive driving course can lower your premium. With some auto insurance programs, this discount is available only to those age 55 and older. But with other companies, even younger drivers can complete the program.

Low mileage discount

If you drive less than average (under 8,000 miles per year, according to some insurers), you might qualify for a low mileage discount. This is because when you drive less, you’re at lower risk of getting into an accident. And car insurance companies want to reward you for this reduced risk.

So if you’re retired, work from home, or have a short commute, the low mileage discount could be worth asking about.

Usage-based insurance (UBI) discount (telematics)

Usage-based car insurance programs (sometimes called telematics) track your driving through a mobile app or plug-in device. Programs like Progressive’s Snapshot, Nationwide’s SmartRide, and State Farm’s Drive Safe & Save, among others, monitor things like:

• Hard braking
• Rapid acceleration
• Speed
• Phone use while driving
• Time of day you drive

Most insurers give you a small discount just for enrolling. Then, at renewal, your rate adjusts based on how safely you actually drive. For example, you might get a 10% to 15% upfront discount, with the potential to bump that up to 30% with good driving habits.

The downside is that some companies could actually increase your premiums if they deem you a risky driver.

Military discount

You could also get a car insurance discount for being active-duty military, a veteran, or a reservist. Some insurers like USAA take the discount a step further by offering additional savings while your vehicle is stored on base or during deployment.

Policy-based discounts

Policy-based discounts are often the easiest way to save on car insurance because they don’t require perfect driving. You just need to be strategic about how you set up and manage your policy.

Here are the most common ones.

Multi-policy discount (bundling)

Almost every car insurance company gives a multi-policy or bundling discount when you buy your auto policy along with your homeowners, renters, or condo insurance policy from that same company. Some insurers advertise savings of 10% or more.

That said, always shop around for car insurance and compare multiple quotes. Some companies could still be more expensive even with a bundled discount.

Also note that some auto insurance companies might call this a multi-line or multi-product discount.

Multi-vehicle discount

Similar to the multi-policy discount, a multi-vehicle discount saves you money when you insure two or more vehicles under the same policy. For example, if you and a partner both drive or you have a teen driver, combining everything under one policy could lower your per-car cost of insurance.

Paid-in-full discount

Another really easy way to save money on car insurance is to pay your premiums in full (rather than paying monthly). When you pay all at once, you reduce the risk of missed payments and help the company save on billing costs. Some of these savings are then passed on to you.

Automatic payment discount

Setting up automatic payments can get you a car insurance discount, too. Plus, it helps you avoid late fees, which can get expensive fast.

Paperless billing discount

Many companies will also give you a car insurance discount for opting to receive statements and other documents electronically instead of by mail. If you’re already managing bills online, there’s really no downside.

Loyalty discount

If you’ve been with the same insurer for years, that company might reward you with a loyalty discount. This can be a nice perk if you’re insured by an affordable car insurance company you love.

Just note that loyalty doesn’t always equal the lowest rate. Always compare quotes every year or two, even if you’ve been with the same insurer for a while. You might be surprised to find better prices elsewhere.

Vehicle-based discounts

Another category you might come across is vehicle-based discounts, which are tied to the actual car you drive. In many cases, these discounts are applied automatically based on your vehicle identification number (VIN). But you can still double-check if they’re included.

Here are the most common vehicle-based auto insurance discounts:

Anti-theft device discount

If your car has an anti-theft system — like an alarm, tracking device, or built-in immobilizer — you might qualify for this type of auto insurance discount. This is because cars that are harder to steal cost insurers less in claims.

Some companies require proof of installation for aftermarket systems, but factory-installed features are usually recognized automatically.

New car discount

Some insurers will give you an auto insurance discount if your vehicle is new and comes with the latest safety features.

Note that this discount could expire as your vehicle gets older. For example, some insurance companies limit this discount to vehicles that are less than three years old.

Safety feature discount

Features like airbags, anti-lock brakes, lane departure warnings, backup cameras, and automatic emergency braking can all help reduce your premium.

Your insurance company might bundle these features together under one discount or break them into multiple categories (such as restraint devices, daytime running lights, and passive restraints).

Hybrid/electric vehicle discount

You could also get a discount on car insurance for having a hybrid or electric vehicle. This is your insurance company’s way of saying thanks for driving an environmentally friendly vehicle.

Other ways to save on car insurance

Car insurance discounts can help you cut costs, but they’re only part of the picture. If you really want to save on car insurance costs, you need to zoom out and look at the full policy.

Here are a few ways to lower your premium beyond standard auto insurance discounts:

• Shop around regularly. Car insurance companies can have wildly different rates, even for the same driver with the same coverage. Getting quotes every year or two can help to keep insurance costs more affordable.
• Adjust your deductible. You could also lower your car insurance premiums by opting for a higher deductible. However, make sure you’re choosing a deductible amount that you could realistically afford to cover in an emergency.
• Revisit your coverage limits. Consider if your current coverage makes the most sense. For example, if you’re driving an older vehicle that isn’t worth much, it might not be worth carrying collision or comprehensive coverage. Or you could decide to drop certain add-ons, like new car replacement coverage or premium roadside assistance.

Keep reading: How much car insurance do I need?