How to Get the Cheapest Car Insurance

Cheap Car Insurance on Minivan
••• Getty Images/Stewart Cohen

Ever wonder what the cheapest car insurance option is for you and your family? One thing for sure is that in the majority of states, auto insurance is absolutely mandatory—and the penalties for not having insurance are never worth the risk. But despite the fact that you need it, there's no year-end clearance sale on car insurance.

However, there are still ways to make sure you are getting the cheapest insurance rate possible. It might take some work to find the best rates, but the following 10 steps can get you well on your way to finding that low-cost car insurance rate you've been looking for.

1. Shop Different Insurance Carriers

Rates can vary widely between major insurance companies—and small ones, too. One company may deem you an average risk and charge you an average rate, while another may find you to be a preferred risk and give you a much lower rate. Others still might deem you an above-average risk, and you definitely want to avoid those insurance options!

A couple of ideas to make shopping easier include contacting an independent agent or using an online quoting website, as well as speaking to local friends and family about the insurance coverage they have, since rates and policy options vary widely across state lines. Independent insurance agents have access to multiple carriers and can guide you to the best company without the pain of making lots of phone calls. For the web savvy, various online quoting websites are popping up to help find the cheapest company for you as quickly as possible.

Just make sure that any website or person that you give personal information to (especially financial information) is trustworthy.

2. Bundle All Insurance Policies

Policies grouped together are almost always cheaper than policies insured with different companies. The multi-policy discount is a great way to save money on insurance. If you are insuring multiple cars, homes, and toys then insure them all with the same company to maximize your savings, and request quotes for bundled policies when you're calling around to different insurers.

3. Verify All Discounts Available

Car insurance companies are notorious for odd discounts. Ask for all the possible discounts and verify which ones you are receiving. A couple of discounts to inquire about are the homeowner discount, paid-in-full discount, and good student discount. You can also get a discount if you complete a defensive driving course, and some insurers will give you a discount for getting married, living in an over-55 retirement community, or paying your bill online instead of getting paper bills. Regardless of how many discounts a company offers, though, it is the final price that counts so don't be swayed by just the discounts.

4. Do You Need Comp & Collision?

In some cases, you can save money by canceling your comprehensive and collision coverage. When you buy insurance, you need different types of coverage to take care of a variety of damages. Comprehensive and collision coverage, often called comp & collision, pays for damage to your car if it's involved in an accident with another object, such as another car, a building, an animal, or hailstorm. It also covers damage from fire, floods or vandalism, and will reimburse you if your car is stolen.

Comp & collision insurance will only pay you the current market value of your car if it's stolen or if the insurance company decides to total it. Do a comparison to see if the cost to carry this coverage is more than the replacement value of your car. This is often true if you are driving an older model or you have a car with high miles that no longer has much resale value.

5. Raise Your Deductible

If you only carry liability insurance, you won’t have any deductible to pay because this insurance covers damage you cause to other people in an accident. However, comprehensive and collision coverage does have a deductible. The larger the deductible amount you agree to pay in case of an accident, the lower your insurance will cost. If you go this route, consider keeping your deductible amount in a savings account so that you don’t get caught unprepared in case anything happens.

6. Consider PPM Insurance

If you don’t drive many miles and you have a good driving record, you could save some money with pay-per-mile or usage-based car insurance. Certain insurers, including Allstate, Progressive and State Farm Insurance, have programs set up to track your driving mileage and habits. In exchange, you can potentially receive discounts on your premiums.

If you log 10,000 miles or less each year, Esurance and Metromile offer mileage-based insurance programs. Not all states are eligible, so check with these companies to see if you can buy this type of insurance in your state.

7. Keep a Clean Driving Record

Safe drivers get some of the best rates. If you are looking for the cheapest rate possible sometimes it can come directly from your own actions. Set your cruise control, turn your cell phone off, and consciously pay attention to the road.

8. Improve Your Credit Score

Good credit is another example of how your actions can influence your insurance rates. Whether you agree or disagree, most insurance companies are basing your rate off of your insurance credit score. Keep your credit score high and your insurance credit score is sure to follow. A great credit score can get you some surprisingly low insurance premiums.

9. Avoid Fees

Look for ways to avoid extra fees. Many insurance companies charge payment fees, and they're essentially charging you for the processing and paperwork of your bill. Paying your premium in full or having your payments taken automatically out of your bank account could save you some money. Late-payment fees can be even higher so be sure to pay on time. Also, find out if combining multiple policies into one billing account can lower fees.

10. Get the Right Coverage

The coverage you carry on your vehicle is a personal choice. Determine the value of your vehicle and weigh its replacement cost against the cost of full coverage. Be smart; if you are not driving one of your vehicles put it in storage. If you do not know all your coverage options, get advice from an experienced agent.

What happens if, after evaluating each of these seven steps you are still not happy with the price of your car insurance policy? Continually managing and improving your credit score and driving record can drastically improve your car insurance rate over time. When your credit score improves or a traffic violation point falls off your record, it's time to shop for a new policy.

Getting the cheapest car insurance possible is something that needs to be reviewed every few years if not more. Car insurance is always changing along with your history and future needs. Talk with your insurance agent for a review of your policy and if you do not like the results, call around for some quotes for comparison.