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Most people know that after an accident, they’ll likely need to use the car insurance they’ve been diligently paying for. Car insurance can protect you from financial liability that has the potential to be devastating.

Being protected by a car insurance policy that is appropriate for your needs and your budget is vital.

What Is Car Insurance?

A car insurance policy is an agreement between you and your insurance company. At regular intervals — typically every six months — you pay the cost of the policy. In return, the car insurance provider pays for damages that occur when an accident happens, whether that damage is to your car or someone else’s car. What and how much the insurance will pay depends on the type of car insurance coverage you purchase.

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How Does a Car Insurance Deductible Work?

If the time comes to put in a claim, you’ll most likely have to pay a deductible first. The deductible for car insurance works in a similar way to that for medical insurance. It’s the amount of money you will pay out of pocket on a claim, up to the limit you agreed to, before your policy picks up the rest.

If you sign up for a high deductible, then your policy payments will be lower. A policy with a $1,000 deductible will not cost as much every month as a policy with a lower deductible. But if you find you need to put in a big claim to have your car fixed, you’ll have to come up with that $1,000 up front. If that is too big a hit for your bank account, then you may want to consider a lower deductible.

Most deductibles range from $250 to $2,000.

Recommended: 5 Steps to Switching Your Car Insurance

Types of Car Insurance Coverage Options

Car insurance coverage varies by type of coverage, amount of coverage, and amount of deductible. Some drivers may want to purchase specialty coverage that will be priced separately, such as coverage for antique automobiles or vehicles driven for commercial purposes or ride-share insurance.

Insurance companies will pay up to the limits of the policy, after any deductible.

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Liability Coverage

A basic car insurance policy is liability coverage that will pay if there are bodily injuries to people in the other car or vehicular damage to the other car, and you are at fault.

Uninsured or Underinsured Motorist Coverage

Sometimes included in a liability policy package but also available as a separate part of a policy is uninsured or underinsured motorist coverage. If someone without their own liability insurance coverage hits your car, this type of insurance pays for your bodily injuries and physical damage to your car.

Emergency Road Service Coverage

If your car breaks down, your battery dies, you lock your keys in your car, or you are left stranded from other incidents, emergency road service coverage can be helpful to have. This type of coverage, sometimes called roadside assistance coverage, may pay for a tow truck or a locksmith or may even bring gas to you so you can make it to the next gas station. This is generally very affordable coverage to add to a policy.

Comprehensive and Collision Coverage

Comprehensive insurance covers repairs to a car that is damaged outside of an accident or stolen. Damage could be things such as vandalism, a broken windshield, a fallen tree on your car, or other occurrences out of your control.

Collision coverage will pay to repair or replace your car if it’s damaged in an accident with another car or even an object such as a fence or tree.

These two coverages are sometimes listed together as “comp and collision” on a policy, but they are available as separate purchases in most cases. Both may be required by a lender if you’re leasing a car or still paying an auto loan. They’re the most common types of car insurance to include in a deductible.

Personal Injury Insurance

Personal injury insurance, or medical payments coverage, will pay for your and your passengers’ medical expenses after an accident, no matter which driver was at fault.

Gap Insurance

If you are still making auto loan payments or you’re leasing a car, gap insurance might be something to consider. This type of coverage will pay the difference between the amount the car insurance company pays and what you still owe on the purchase or lease in the case of a total loss after an accident.

Understanding car insurance terms will help you make a smart decision about what types and amounts of coverage to purchase.

Recommended: Average Cost of Car Insurance in California

Do You Need Car Insurance?

In most states, you must have at least some form of liability coverage. In fact, to legally register and drive your car, you’ll have to establish and maintain a minimum level of coverage.

New Hampshire is the exception. New Hampshire drivers are not required to carry any automobile insurance unless they have had their driver’s license revoked or were unable to prove they can pay for damages in the case they were at fault in a car accident and were uninsured, among other stipulations.

In all U.S. states, driving without at least minimum liability coverage may result in being fined and even losing your driver’s license.

Recommended: What Is Gap Insurance?

How Much Car Insurance Do You Need?

After you’ve purchased liability coverage, other coverage may be optional. But just how much auto insurance do you need? An older car whose value is lower than the coverage costs, including any deductible, might just need liability coverage instead of comprehensive and collision coverage.

Some things to consider when purchasing insurance are the value of your car, your driving history, how far and how often you drive the car, and how much you could afford to pay out of pocket if you are in an accident.

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How Much Does Car Insurance Cost?

According to Experian, the average full-coverage car insurance policy costs $2,924 per year or about $244 a month. However, these averages vary widely by state. Maryland, Connecticut, and New York reportedly have the most expensive car insurance policies.

Other factors that go into car insurance policy prices are what kind of driving record you have, your age and gender, and the type of car you’re insuring, among others. If you get a speeding ticket or you’re at fault in an accident, your insurance policy is most likely going to go up in cost.

Car insurance is highly competitive, so comparison shopping can be a wise move.

Recommended: Average Cost of Car Insurance in Florida

How to File a Car Insurance Claim

It’s recommended that claim filing should happen as soon as possible after an accident. Call your insurance company and be ready to inform your insurer which vehicle was involved, who was driving, the exact location and time of the accident, the description of the damage, and the name and insurance of the other driver.

If the incident you report is covered, your insurer will pay, up to the policy limits, for the cost of the damage you caused, or the damage to your car, minus the deductible if you have one. Your insurer may pay you directly. Or payment may be made to the other driver or to the repair shop working on your car.

Some insurers request a copy of the police report filed on an accident. If you didn’t call the police at the scene, you can still go to the local police precinct to file a report.

Recommended: Car Insurance Guide for New Drivers and 3 Ways to Save

The Takeaway

Car insurance companies pay a claim when there are injuries to people and damages to a vehicle from an accident that has occurred. Types of coverage vary from minimal liability coverage to more broad-spectrum comprehensive and collision coverage, in addition to some coverage for special situations.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

How does paying for car insurance work?

When you have car insurance, you pay a fee at regular intervals to keep the policy active, then when it comes time to submit a claim, you will have to pay a deductible, the amount of money you have agreed to pay out of pocket. This typically falls in the $250-$2,000 range. Your insurance policy then covers the rest of the costs.

Is $300 a month for car insurance bad?

Car insurance that costs you $300 a month is on the higher end. The current national average for a full-coverage policy is $2,924 a year, which comes out to about $244 a month.

What determines the insurance cost for a car?

Car insurance costs are determined by your driving record, your age and gender, and the type of car you’re insuring, among other factors. They also vary by location. According to the most recent data available, Maryland, Connecticut, and New York have the most expensive car insurance policies.

What state has the cheapest car insurance?

According to 2026 Experian data, the cheapest states for car insurance are Vermont, Maine, and New Hampshire. The monthly costs for each are over $100 lower than the national average of $244.

Photo credit: iStock/Melena-Nsk

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If you no longer want to continue with your coverage, you may be wondering, Can you cancel life insurance? Or maybe you’re currently investigating how to cancel a life insurance policy in case you decide to stop yours in the future.

Whatever your reason, this post will guide you through the cancellation processes for both term life and whole life insurance policies. You’ll also learn about some alternatives to canceling your policy.

First, Can You Cancel a Life Insurance Policy?

You can usually cancel your life insurance policy at any time if you decide that you no longer want or need the life insurance coverage it provides. How that’s done will vary based on how long you’ve had the policy (meaning, if it’s brand new or not) and whether it’s a term life or whole life insurance policy.

How to Cancel Life Insurance

In each state, there’s a “free look period” during which you can cancel a life insurance policy for any reason by appropriately informing the insurer. You can find timelines for the free look period in your policy. A typical period lasts 30 days from when your policy begins, but it can be as short as 10 days, depending on the state in which you live.

If you cancel during this timeframe, you’re entitled to a refund of your first premium payment without penalty. After the free look period ends, how you cancel your life insurance policy will depend on what type of life insurance it is.

Though there are other types of life insurance, you’ll learn about term and whole life insurance here.

Canceling Your Term Life Insurance Policy

Term life insurance guarantees payment of a predefined death benefit when the policy owner dies during a specified term. After the term ends — perhaps after 10 or 20 years — the policyholder might renew the life insurance for another term, decide to let the policy end, or convert it to a whole life policy. Or, before the policy’s term ends, you can cancel it. Here’s how.

Inform the Insurer

Check the insurance company’s website to see if they have a termination form, or write them a letter to let them know you are canceling your policy. You could also call your provider to get the process started. It’s really that simple when it comes to communicating your desire to cancel with the insurer.

Stop Making Your Payments

If you’re having the payment automatically deducted from an account, check to see how much notice you have to give the financial institution to stop the next payment. The Consumer Financial Protection Bureau offers advice on stopping automatic payments.

It’s true that if you simply stop making your premium payments, the insurer will void your policy. How long that would take would depend on the policy’s conditions. Although this may be the easiest route to take, informing the insurance company ties up loose ends.

Canceling Your Whole Life Insurance Policy

A whole life insurance policy lasts for the policyholder’s lifetime, as long as the premiums are paid. Policyholders typically pay a higher premium, with a portion of the amount being invested. The invested funds can then be drawn upon by the policy owner. Because of this, you actually surrender a whole life policy when you want to stop it rather than cancel it.

Consider the Cash Value

As you pay into this policy, you’ll gradually build up cash value. It may take 10 years or so for that to happen, but when it does, surrendering (canceling) your policy may mean that you’ll get a check from the insurer for the cash value built up in the policy.

Investigate Collateral Approach

If a whole life policy has a reasonable amount of cash value, then the policy can be used as collateral for a loan instead of surrendering it. If the loan isn’t repaid, then the outstanding balance and interest owed would be deducted before the death benefit was paid out to beneficiaries.

Modify Your Policy

Your insurance company may allow you to reduce your whole life premiums or even stop paying them while still maintaining some or all of the death benefits for your beneficiaries. In those cases, the premiums would be paid out of the cash value in the policy. Talk to your agent first, though, to make sure this is doable.

Do You Get Money Back if You Cancel Life Insurance?

With a term life insurance policy, when you cancel, it’s unlikely that the insurer will refund any premiums paid, and the death benefit to beneficiaries no longer exists. So, with term life, the answer is “no.”

With a whole life policy, though, if you’ve built up cash value, that will be provided to you after you surrender the policy, although any surrender fee is typically taken out first. When you cancel a whole life policy, ask how much money will be refunded as well as when and how you’ll get any funds back.

When Should You Cancel a Life Insurance Policy?

People cancel their policies for a variety of reasons. Here are some examples of when it may make sense to cancel your life insurance policy:

•   You no longer need it. Some people simply may feel they no longer need the policy — perhaps because the dependents listed as beneficiaries are no longer in need of this money or because they, the policyholders, no longer have debt that would need to be paid off.

•   Your premiums are straining your budget. Other times, the premiums are too much for the person’s budget, so they decide to cancel. Perhaps, through this action, they can also collect on the policy’s cash value for needed funds.

•   You can qualify for a better rate on a new policy. A policyholder may have made lifestyle changes (for example, stopped smoking) or their health may have improved, so they can now qualify for a better rate on a new life insurance policy. Keep in mind that, depending on how old you are, the premium may be the same or higher than the lower-rated policy.

•   You want to invest your premiums in another way. As another reason, some people cancel a whole life insurance policy and then invest the premiums paid, and any cash value refunded to them, in another way where they hope to earn more money.

Alternatives to Canceling Life Insurance

Talk to your insurer to see what options exist if you plan to cancel your life insurance policy. One possibility already mentioned is to see if you can have your whole life premiums paid out of your cash value in part or in full.

Or, if you think you still need life insurance but the premiums are too high for your budget, you can consider ways to adjust your budget to keep making your payments. For example, there may be subscriptions for streaming services or online tools that you automatically pay for but seldom use. You could consider canceling those services and continuing to make your life insurance premiums with those newly available funds.

Another possibility, if you’d like to cancel a life insurance policy and then buy another policy that’s better for you, is to consider looking into what’s called a tax-free 1035 exchange. This can allow you to make the switch without tax consequences.

Also, check your policy to see if life settlements are permitted. In that situation, the policy is transferred to a new owner, and you could receive cash in a lump sum. Just make sure to explore tax consequences if this option appeals to you.

The Takeaway

You can cancel a life insurance policy, and it’s pretty easy to do. Whether or not you’ll get money back depends on the type of policy you have. With a term life insurance policy, there isn’t any cash value, so you wouldn’t typically get any refund. With a whole life insurance policy, if you’ve paid enough into the policy to have cash value, then you would usually get some money back after surrendering the policy. Reasons why someone cancels a policy vary, and there are alternatives to canceling.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

FAQ

Can I cancel my life insurance policy?

You can cancel your life insurance policy at any time, although the process depends on the type of policy you have. If you’re within the free look period, which is usually 10 to 30 days after your policy begins, you can generally cancel for a full refund of your first premium.

Will I get my money back if I cancel my life insurance policy?

With a term life insurance policy, the insurer is unlikely to refund any premiums paid. However, with a whole life policy, if you’ve built up cash value, it will be provided to you (minus any surrender fee) after you surrender your policy.

Are there any alternatives to canceling a life insurance policy?

You could consider a tax-free 1035 exchange, which will allow you to perform a tax-free transfer of one type of policy to another similar policy. You can also talk to your insurer to see what options exist if you plan to cancel your life insurance policy.

Photo credit: iStock/PeopleImages

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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Should you get into a car accident and harm someone else or yourself with your car, your car insurance may cover the costs of medical bills. Depending on the coverage included in your policy, car insurance could also cover damage to your car while it’s parked, such as if a large tree branch were to fall on it.

Ultimately, what your auto insurance will cover — and how much — depends on what type of car insurance you have and the amount of coverage you select. Read on to learn more about how exactly auto insurance works.

How Car Insurance Works

When you purchase auto insurance, you can choose different types of insurance and policy amounts. Depending on the state where you live, there are certain car insurance requirements you’ll need to meet — more about this later on.

Adding more types of insurance and higher coverage limits provides greater coverage, but it also raises your premiums. Having a lower deductible can also bump up your rates. On the other hand, a higher deductible can lower your rates.

A deductible is a common auto insurance term that means how much you would need to pay up front before insurance coverage kicks in.

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Car Insurance Requirements

Most states require car insurance, with the type of insurance and minimum coverage amounts depending on the state.

The only state that does not require car insurance is New Hampshire. While auto insurance is not mandatory in New Hampshire, if you’re at fault in an accident, you would need to show that you have enough funds to meet the state’s motor vehicle financial responsibility requirements.

If you’re not sure what the minimum requirements for car insurance are where you live, you can check your state’s DMV site. Keep in mind that while you can squeak by with the minimum coverage, how much car insurance you need varies. Depending on your situation, it may be a good idea to get more coverage.

Types of Car Insurance

When comparing car insurance, there are six main types to keep in mind.

Bodily Injury Liability

If you get into a car accident and are found to be at fault, bodily injury liability coverage can help cover medical bills and wages lost for taking time off of work because of bodily harm. It can also cover named drivers, such as family members, on your policy or drivers who are using your car with your permission.

Bodily injury liability is typically must-have coverage. According to the most recent data available from the Insurance Information Institute (III), the average claim for bodily injury was $26,501 in 2022. Having enough coverage could help protect your property, assets and home.

Collision

If you crash into another car or an object, or if your car gets damaged from driving over a pothole, collision coverage can pay for the costs to repair any damages to your car. It can also cover damages should your car flip over. Once your deductible is paid, the coverage will kick in.

If the other driver is the one at fault, then typically a claim can be filed with their insurance company and they’ll cover the costs. In the case where the other driver’s coverage amounts aren’t enough, and if you don’t have uninsured motorist coverage (sometimes called underinsured coverage), then your own collision policy can step in.

If you’re taking out a loan and still paying off your car, lenders will likely require you to have full coverage, which includes liability, collision, and comprehensive insurance.

Recommended: How Much Does Insurance Go Up After an Accident?

Comprehensive

While collision coverage can cover the costs of damage during a car crash, comprehensive liability includes everything else — such as a deer running into the front of your car, riots and vandalism, a tree branch falling on your car, hail damage, or other natural disasters. Comprehensive coverage can also pay for a broken windshield (though whether it makes sense to file a claim depends on your policy and deductible). It can also cover theft, of either your entire car or a piece of your car, such as a hood ornament.

Recommended: Does Car Insurance Cover Theft of Personal Items?

As mentioned before, if you’re still making payments on your car, you most likely are required to have both comprehensive and collision insurance in addition to liability coverage.

Personal Injury Protection (PIP)

Should you, as the driver, or your passengers get harmed in a car accident, personal injury protection (PIP), also known as medical payments coverage, can help pay for medical bills, lost wages and sometimes funeral costs. It can cover these costs no matter who is at fault, which is why it’s sometimes called no-fault insurance.

Depending on your policy, PIP can also help pay for bodily harm should you get injured while walking or riding a scooter or a bike.

Property Damage

As with bodily injury liability, property damage coverage is also usually required in most states. Let’s say you or a named driver on your policy damages another vehicle or property, such as the side of a building. In these situations, property damage can reimburse the cost of repairs.

Uninsured or Underinsured Motorist

In the case of a hit-and-run, uninsured or underinsured motorist coverage can foot the bill for covered damages. Or, should someone who hits you not have adequate insurance, this type of policy can help pay for any shortfalls.

Special Considerations When Choosing a Policy

Besides the standard types of policies, there are some additional considerations to keep in mind when it comes to choosing an auto insurance policy.

Roadside Assistance

While not a type of insurance, roadside assistance can come in handy should you get a flat tire, or if your battery dies while on the road. While you can usually attach this to your existing auto policy as an add-on, what exactly is covered might vary by carrier.

Outside of purchasing roadside assistance as an add-on to your car policy, you can also shop around for companies that offer roadside assistance as a standalone service.

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New Car Replacement Coverage

If your new car gets totaled, new car replacement coverage can replace the vehicle in its entirety. This is usually available as an add-on if you purchased a policy with collision and comprehensive insurance.

Depending on the insurance company and carrier, this might cover cars that are no more than two years old. Plus, restrictions and limitations might differ.

Rental Reimbursement Coverage

If your car is getting repaired and those repairs are covered under a car insurance claim, a policy might include an add-on to cover the fees for getting a rental car or other transportation while your vehicle is in the shop. Whether you take public transit, rent a car, or take a rideshare, what exactly is covered depends on your specific policy and limits.

Rideshare Coverage

If you’re a rideshare driver for a company like Uber or Lyft, you’ll need to meet the minimum coverage amounts for that particular company. Some insurance companies provide rideshare coverage in their policies. If not, you might need to get a rideshare endorsement or a separate rideshare insurance policy.

Car Rental Coverage

If you have liability and comprehensive coverage on your car, then that coverage can typically carry over to when you rent a car within the country. As mentioned before, depending on the particulars of the policy and car insurance company, this might not be applicable in every state, and the amount of coverage can also vary.

What Does Car Insurance NOT Cover?

While auto insurance can cover a lot of things, it doesn’t cover normal wear and tear or routine maintenance. And unless it’s a rental car, it doesn’t provide coverage when you’re driving someone else’s car.

A policy also doesn’t pay for lost personal belongings in your car, such as headphones or gym gear. This could be covered by a homeowners or renters insurance policy.

At the end of the day, not all policies are alike, nor are they created equally. It’s important to check to see what your policy will cover.

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The Takeaway

There are six main types of insurance: bodily injury liability, collision, comprehensive, personal injury protection, property damage, and uninsured or underinsured motorist coverage. The type of coverage and limits required vary by state. When choosing a policy, you’ll also want to consider whether additional coverage such as roadside assistance, car rental coverage, or new car replacement coverage is right for you.

Taking the opportunity to compare car insurance companies before committing to a policy can be a smart move that might save you money on your insurance rate.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

What is the difference between collision and comprehensive coverage?

Collision coverage helps pay for repairs to your vehicle if you crash into another car or object. Comprehensive coverage covers noncollision incidents, such as theft, vandalism, or natural disasters.

Does car insurance cover medical bills?

Yes, car insurance can cover medical bills through certain types of coverage like bodily injury liability and personal injury protection (PIP). Bodily injury liability covers others’ medical expenses if you are at fault, while PIP can cover your own medical bills regardless of fault.

What is a car insurance deductible?

A deductible is the amount you agree to pay for damages before your insurance coverage kicks in to pay the remainder. Generally, choosing a higher deductible can lower your monthly premiums, whereas a lower deductible typically results in higher insurance rates.

Does my car insurance cover me if I rent a car?

If your current policy includes liability and comprehensive coverage, that protection can often carry over when you rent a car within the United States. However, coverage limits and applicability can vary significantly by state and your specific insurance company’s policy terms.

Photo credit: iStock/tommaso79

All insurance products shown on SoFi are underwritten and provided by licensed insurance carriers, not SoFi Agency. SoFi Agency does not underwrite or price insurance policies. Insurance products presented may not be available in all states, and your rates and savings will vary based on individual factors. The rates or savings advertised are not necessarily available from all providers or advertisers. Not all carriers or options in the marketplace are shown.

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There are some life insurance basics to be aware of to make the right choice for your needs.

Some things that affect the price of auto insurance you can’t do anything about, such as your age, and some you might not want to change, such as where you live. But by comparing rates, you may be able to figure out how to get cheaper car insurance.

Here are some other considerations.

How to Get Cheaper Car Insurance

Wondering how to lower car insurance costs?

There’s no downside to looking for a lower premium than you’re currently paying on car insurance. If you find out you have a better deal than you thought, you can stick with the company and the premium you have.

But if you’ve had the same coverage and carrier for years (or even a year), you may benefit from making some changes.

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Shop Around and Get Some Quotes

Rates for the exact same coverage can vary from one insurance company to the next and from one customer to another. Using an online comparison site to shop for a policy and premium based on your specific needs can be a good way to start your search for savings.

The Insurance Information Institute recommends getting at least three price quotes when you’re shopping for a better rate.

You’ll likely see plenty of company names you know when you use a comparison site, but you also may run into some that are less familiar. If you’re intrigued by a company’s rates and coverage options but want more information, you can read consumer reviews online.

You also can check out a company’s financial health with a rating service such as AM Best or S&P Global. And you can contact your state insurance department to ask about any complaints related to a particular insurer.

Once you’ve done some research, you also may want to contact your current insurance provider to see what savings options it might offer to keep you as a customer.

Recommended: 5 Steps to Switching Your Car Insurance

Look for Discounts

When you’re shopping, it’s smart not to overlook the opportunity to save money on your auto insurance premiums with discounts.

Many insurers offer price breaks based on things that make a driver statistically safer to insure, such as a good driving record or a vehicle with extra safety or anti-theft features. Drivers of all ages may qualify for a discount after taking a defensive driving course. And carpoolers and those who work from home may benefit from low-mileage discounts.

You also might be able to get discounts for behaviors that cut costs for the insurer, such as going paperless, using automated payments, or paying premiums annually instead of two or more times a year.

All discounts are not created equal: Some provide a larger price cut than others, so it can help to look at the bottom line. The amount you can save also may vary by company and location. The options can also change from year to year, which is another reason why you should check car insurance rates regularly.

Recommended: How Much Auto Insurance Do I Really Need?

Explore Bundling

Another way to get a price break can be to “bundle” your insurance coverage with one insurer. That might mean purchasing your renters or homeowners insurance and car insurance from one company, or using one company for both your car and boat insurance.

You also might get a reduction if you are insuring more than one vehicle.

Bundling can result in a substantial discount. Still, you may wish to get separate policy quotes as well, just to be sure you’re really saving money and getting exactly what you want.

Consider a Higher Deductible

Choosing a higher deductible can significantly reduce your premium. (Your deductible is the amount you’ll pay out of pocket before your insurance company pays the rest of a claim.)

According to the Insurance Information Institute, increasing your deductible from $200 to $500 could cut the cost of collision and comprehensive coverage by 15%-30%. And going even higher, to $1,000, could save you 40% or more, the insurance industry association says.

Of course, there’s a catch: If you have an accident, you may end up having to fork over a larger chunk of money than you’re comfortable with before the insurance company kicks in its share on a claim.

Before you go for the savings, you may want to be sure you can afford an unexpected repair bill.

Recommended: How Much Auto Insurance Do I Really Need?

Review Coverage Needs

If you have a car that’s getting older, it might be time to reevaluate the coverage you’re carrying on it.

For example, you may decide to drop your comprehensive coverage (the portion that helps pay to replace or repair your vehicle if it’s stolen or damaged in an incident that’s not a collision) or collision coverage. Or you may decide to lower the amount of those coverages.

Keep in mind, though, that if you do give up this coverage, you may have to pay to repair or replace your vehicle if it’s damaged. So it’s important to balance today’s savings with tomorrow’s what-ifs.

As you make your decisions, you’ll have to keep any coverage that’s required by the laws in your state and by your lender (if you’re still paying for the car) or a lease agreement.

Recommended: What Does Car Insurance Cover?

Before Buying a Car Consider Insurance Costs

Some cars cost more to insure than others, so before you save up for a car, you may want to check out how buying a used or new car might affect your premiums.

Insurance companies base their prices, in part, on a car’s sticker price, its safety record, what it might cost to repair it, its engine size, and the chance that the car will be stolen.

You may have heard that color is also a factor and that a red car can cost more to insure. But according to the Insurance Information Institute, that is a myth. You can, however, expect a powerful sports car to kick up your costs.

Recommended: How Much Auto Insurance Do I Really Need?

Improve Your Driving Record if Needed

This one’s pretty basic: A person with a bad driving history — think multiple accidents, insurance claims, and/or traffic violations — can expect to pay more for car insurance than someone with a good record.

If you aren’t sure where you stand, or you think there might be an error on your record, you can get a copy of your motor vehicle report through your state’s department of motor vehicles or the agency that handles driver’s licenses.

Improve Your Credit if Necessary

You probably already knew that maintaining a good credit record can save you money in many ways, and you can include lower car insurance premiums on that list.

Just how much a solid credit score can save you may depend on the insurance company and the state you live in. But you can expect your credit data to play some part in your provider’s underwriting decisions.

The good news is, there are steps you can take to build credit fast, including disputing any errors on your credit reports and paying your bills on time.

Ask About Group Insurance

Some companies and other organizations offer group plans with lower rates for their employees or members. Your human resources department can fill you in on what’s available through your employer.

If you’re a member of a large organization, you may receive insurance offers in the mail or by email, or you can inquire with the main office.

The Takeaway

Wondering how to lower your car insurance? A good starting point on the road to cheaper car insurance can be to compare your current policy to offers from other insurance companies.

Try an apples-to-apples comparison of your existing policy to others to find the best deal, and if you like your quote, buy the policy right then and there.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

How to lower your car insurance after a ticket

Completing a defensive driving course could help insurers see you as a lower-risk driver. You may also lower your rate by agreeing to a higher policy deductible and exploring providers that offer flexible rates for drivers with violations.

Can I ask my insurance company to lower my premium?

Yes, you can ask your insurance company if there are ways to lower your premium. In some cases, selecting a higher voluntary deductible, installing anti-theft devices, or removing unnecessary add-ons could reduce your overall cost.

How to lower car insurance as a new driver

As a new driver, you may be able to lower your car insurance premiums by taking a defensive driving course and choosing a car with a smaller engine and a lower theft rate. It can also help to compare quotes from different insurers each year to find a competitive price.

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