Auto insurance is expensive, mandatory in most states and, if we’re honest, responsible for some of the most memorable TV commercials of the past two decades. But above all, car insurance can be incredibly confusing unless you take the time to learn about it.
As an overworked college student managing bills on my own, I made a few rookie moves with my car insurance — like selecting a $1,000 deductible for a Toyota Yaris that likely wasn’t worth more than $1,500. At that stage, paying for coverage beyond my state’s minimums didn’t make sense.
Since then — and after spending five years writing about cars and needing to avoid embarrassment among friends and family — I’ve learned the nuances of insurance policies and how to trim my monthly premiums.
Understanding Car Insurance Components
Your auto policy probably contains several different elements. The simplest way to divide your coverage is into four categories: liability coverage, vehicle coverage, medical coverage and optional endorsements.
Liability Coverage
Liability protection shields you financially when you cause harm to other people or their property — including other vehicles, structures and road fixtures.
Liability typically includes:
- Bodily injury liability: Pays for medical bills, lost wages and rehabilitation for people you injure in an accident you caused.
- Property damage: Covers repair or replacement costs for another driver’s car and may also cover damage to fences, signs, light poles and other property.
Liability may also encompass uninsured motorist and underinsured motorist coverages. It’s an unfortunate necessity: if you’re hit by a driver who flees the scene or lacks sufficient insurance, these coverages protect you. In other words, because other people can be careless, you need protection for their mistakes.
Vehicle Coverage
While liability looks after others’ losses, vehicle coverage protects your own car. That’s where collision and comprehensive coverages come in. If your car is paid off, these aren’t required, but they’re recommended for fuller protection.
- Collision insurance pays for repairs to your vehicle if you collide with another car or object and you’re at fault.
- Comprehensive insurance handles damage from non-collision events — things like hail, striking a deer, broken glass, theft or vandalism.
Medical Coverage
If you or passengers sustain injuries in a crash, you’ll want medical coverage to help cover hospital and related expenses.
This section typically includes two parts:
- Medical payments coverage: Pays for hospital care and can also cover funeral expenses, injuries sustained as a pedestrian or cyclist and even dental work. Confirm details with your agent since some costs may overlap with your health insurance.
- Personal injury protection (PIP): Often called “no-fault” insurance, this pays medical expenses regardless of who caused the crash.
Optional Endorsements
You can add extras that may prove useful in certain situations, though they will raise your premium.
- Rental reimbursement coverage helps cover the cost of a rental car while yours is being repaired or replaced.
- Emergency roadside assistance is handy if your battery dies, you get a flat or need towing assistance.
Practical Ways to Cut Your Monthly Car Insurance Bill
Knowing what each coverage does is essential to lowering your monthly insurance payment because it helps you reassess how much protection you actually need.
I asked drivers how they managed to shrink their premiums. Most answers were obvious — avoid accidents and traffic violations — but I heard some useful, practical tips too.
Zach Berry, editor at The News Wheel, pointed out that the trick to cheaper insurance is similar to the trick for lower car payments: “Buy used.” He’s right — used cars are typically cheaper to insure because their replacement value is lower and they generally have less theft risk.
Aaron Widmar, another editor at The News Wheel, joked that public transit is the ultimate way to cut car insurance costs. He wasn’t wrong: if you live in a city with good transit and can ditch your vehicle, you’ll eliminate not only fuel and loan payments but also monthly insurance premiums.
Cat Hiles, a freelance writer for Savinly, skips rental reimbursement because she and her spouse own two cars between them. With flexible schedules, they can manage on one vehicle while the other is being repaired, avoiding the extra monthly insurance fee.
My partner, Chris Reynolds, shops for new quotes every year. While insurers often reward long-term customers with perks like deductible reductions for accident-free years, switching carriers has helped him secure better pricing and incentives by driving competition for his business.
Automotive marketer Jack Elliott recommends picking cars with modern safety features next time you shop for a vehicle. “The safety tech in my new car actually lowered my monthly insurance cost,” Elliott said.
Rain Turner, a longtime editor for Savinly, recalls carrying liability-only coverage two decades ago. “As a single parent in college, liability-only was inexpensive and kept me legal,” she said. “Now we have full coverage because our cars are older, we drive a lot and my spouse has had a couple of accidents.” The takeaway: choose coverage that fits your situation and avoid overpaying for extras you don’t need.
Brian Moore, my father and a small-business owner in Dayton, Ohio, bundles his home and auto policies and combines them with his business insurance. Packaging multiple policies together has earned him substantial discounts.
I’m enrolled in my insurer’s safe-driving program. So far it’s shaved about 3% off my monthly bill; my goal is to reach a 10% reduction. Ask your agent whether your insurer offers similar safe-driving incentives.
If you’re disciplined about saving, consider choosing a higher deductible. Opting for a $1,000 deductible instead of $500 can significantly lower your monthly premium. Put the monthly savings into a separate account until you’ve built up the deductible amount so you’re prepared if you need to file a claim.
Also remember to shop around and compare plans — including options like the cheapest new iphone cell phone plan for other monthly expenses — to keep your budget balanced.
Like taxes, car insurance is unavoidable in most states if you own a vehicle. Make your monthly payments less painful by learning what your policy actually covers and adjusting it to meet your needs.
Jordan Lane, a Nashville-based writer who has covered the automotive world for five years, currently drives a Hyper Blue 2017 Subaru Crosstrek and is open to trading it for an electric vehicle someday.
