Car insurance: Lower your rates by avoiding these fees and add-ons

Car insurance is a big expense these days: Drivers paid an average of $212 a month for full coverage in February 2024, according to data compiled by Bankrate, a 26% increase from 2023.

Savvy shoppers know you can save money by comparing rates, bundling home and auto insurance and maintaining a good credit score. But you can also trim your premiums by eliminating unnecessary fees and options.

You might be paying a surcharge and not even realize it.

Many car insurance companies charge a fee to pay your premiums in monthly installments, rather than in one annual lump sum. States don't regulate these fees, so they can be significantly higher than the cost insurers pay to process your payments.

Your carrier might offer a discount for paying your yearly premium up front: Progressive's paid-in-full discount is worth up to 15% off, one of the best in the market.

Progressive offers more than a dozen other discounts, including for homeowners and safe drivers. Policyholders who qualify for the multiple-car discount average a saving of 12% off their premiums.

Auto-Owners will also discount your rate if you pay in full upfront. The Michigan-based insurer is known for its affordable rates, especially for minimum coverage policies and for specialty vehicles, including classic cars and vehicles modified for accessibility.

It may not be financially feasible for you to pay your annual premium all in one go. If so, a high-yield savings account (HYSA) could help you earn the funds faster: Marcus by Goldman Sachs has a HYSA with an APY of 3.40% with no monthly fees or minimum balance requirements.

Paying for your car insurance with a credit card might earn you rewards like cash back or travel points. However, some companies add a convenience fee of up to 4% for charging your premiums. Based on the average monthly premium in February 2023, that would work out to $102 a year.

While some of the best rewards cards can earn 2% cash back, you'd still be in the red.

Some companies will waive this fee if you're paying in full, but if you're paying month-by-month, consider linking your checking account and setting up an automatic electronic funds transfer instead of paying with a credit card.

Insurance companies don't charge a lot for roadside assistance — Geico offers it for as little as $14 a year. However, if you already get roadside assistance elsewhere, why pay twice?

The Chase Sapphire Reserve® (see rates and fees) comes with roadside protection, which covers $50 service calls four times a year through a partnership with Cross Country Motor Club. Available 24 hours a day, it includes towing, jumpstarts, lockouts and fuel delivery.

The card's $795 annual fee is further offset by an annual $300 travel credit and 8X total points on all Chase Travel^SM purchases.

Most auto manufacturers offer some kind of assistance if you lock yourself out of the car, run out of gas or get a flat, according to Edmunds. Coverage is usually capped at a certain number of miles or years, and each manufacturer's offerings are different, so review your owner's manual or ask the dealer.

If you work with an insurance broker to find an auto policy, you'll likely pay them a commission. You may decide their professional expertise is worth the cost, but you can also gather quotes on your own or with no-cost aggregate sites like Insurify and The Zebra.

Since cars can depreciate quickly in their first few years, the amount you owe on a car loan may be more than the automobile is worth. Gap insurance can cover the difference if the vehicle is totaled or stolen.

If you lease a new car, you may be required to have gap insurance — in fact, it may be included in your lease. If it is, there's no need to buy gap coverage twice.

If you want to lower your auto insurance premiums, review your statement and see if there are fees or services you can eliminate. It's not a replacement for comparison shopping, but removing gratuitous charges can add up to some real savings.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every insurance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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