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It's not your imagination: The cost of auto insurance has increased steadily since 2022, according to AP News. Even if you haven't had a ticket or accident recently, your rates may be rising due to the soaring cost of car repairs. If you can't afford car insurance, increasing your deductible, looking for discounts and comparing prices from several insurance companies could help you find a more affordable policy.
Why Is Car Insurance Important?
In most states, you need a minimum level of car insurance to legally drive. States typically require liability insurance, which pays medical costs and property damage for other people involved in an accident you cause.
Beyond these minimums, some states also require drivers to carry uninsured or underinsured motorist coverage, medical payments coverage or personal injury protection insurance. If your car is leased or financed, your lender usually requires collision and comprehensive coverage to protect the vehicle from loss or damage due to things like collisions, theft or natural disaster.
If you're found driving without car insurance, you could be fined, lose your license or have your car impounded. In serious cases, you might even go to jail.
Going without car insurance also poses some major financial risks. If you cause an accident while driving without insurance, you may have to shoulder the cost of the other party's car repairs, medical bills and more. Depending on the severity of the accident, this could add up to hundreds of thousands of dollars. If you can't pay, the injured party could sue you.
What if your car is stolen or hit by a falling tree branch? Without car insurance, you'll have to pay to repair or replace your vehicle. Considering the average new car costs $48,644 as of June 2024, according to Kelley Blue Book, this could put a serious dent in your budget. If your leased or financed car is damaged and you don't have the minimum auto insurance your lender requires, they could repossess the vehicle.
What Happens if You Don't Pay Your Car Insurance?
Your insurance company may cancel your coverage if you don't pay your car insurance. They must notify you before canceling your policy. You generally have a grace period of about 10 to 20 days past the due date to pay your insurance premium. This may differ depending on your state; check with your insurance carrier for details.
In addition to dropping you, the insurance company may report your late payment to credit bureaus or even send your account to collections. Both can negatively affect your credit score. Canceled car insurance remains on your motor vehicle record for three to five years. Insurers may charge you more for car insurance during this period, since you're considered a high-risk driver.
What to Do if You Can't Afford Car Insurance
Here are eight ways to make car insurance more affordable.
1. Adjust Your Budget
When your expenses rise, adjusting your budget can help. Look for ways to cut spending so you can afford car insurance. For instance, you might want to cancel unused subscriptions, eat out less often or spend less on clothing.
2. Increase Your Deductible
Your car insurance deductible is the amount of a claim you're responsible for before your insurance kicks in. Typically, you can select a deductible ranging from $250 to $2,000. Opting for a higher deductible can lower your premiums, but means you must pay more out of pocket before insurance kicks in. Before raising your deductible, be sure you can afford to pay the higher amount in case of a claim.
3. Reduce Your Coverage
Purchasing collision and comprehensive coverage for an old, paid-off car isn't always worth the cost. For example, if you have a $500 deductible and a car worth $2,000, the most your insurance would pay if the car were totaled is $1,500—which may be less than you pay in insurance premiums over the course of a year. On the other hand, if you're struggling to pay car insurance, you might not be able to replace a totaled car without financial help. In this case, consider dropping extras such as rental reimbursement coverage, windshield replacement coverage or roadside assistance instead.
4. Look for Discounts
Most car insurance companies offer a wide range of discounts. You might qualify for car insurance discounts if you go several years without accidents or tickets, own a home, take a driver safety course, are a student with good grades or belong to certain organizations. You may also get a bundling discount by purchasing more than one kind of insurance from the same company, such as home and auto insurance.
5. Drive Less
Many insurers offer low-mileage discounts, usually for those who drive less than 12,000 miles per year. This may require reporting your odometer reading to the insurance company or having a tracking device placed in your car. Another option is pay-per-mile car insurance, which charges a monthly base rate for a certain number of miles, plus a per-mile charge for every additional mile. Carpooling, taking public transit and walking or biking whenever possible could help you drive less and save money.
6. Change Vehicles
Car makes and models that cost a lot to repair or replace, have poor safety ratings or are frequently involved in claims typically cost more to insure, according to Progressive. Alternative-fuel vehicles, cars with safety features or cars with anti-theft devices may save you money on car insurance. Check to see how trading in one vehicle for another might affect your premiums.
7. Shop Around
Auto insurance premiums can vary widely from one insurance company to another. Comparing quotes from several insurance carriers can help you get the coverage you need at the best price. Be sure you're comparing the same type and amount of coverage. Streamline the process by using Experian's free auto insurance comparison tool. It gathers quotes from more than 40 insurance companies all in one place.
8. Improve Your Credit Score
Insurance companies in most states may review your credit-based insurance score when setting your car insurance rates. These scores differ from your consumer credit scores, but are based on similar factors, such as your outstanding debt and payment history. The same actions that can help boost your consumer credit score, such as paying bills on time, could improve your credit-based insurance score, which might mean paying less for car insurance.
Frequently Asked Questions
Factors that affect car insurance costs include:
- Your vehicle: Cars that cost more to repair or replace or are more likely to cause damage usually cost more to insure.
- Your driving record: You'll pay more if you have poor driving habits, such as lots of accidents or moving violations.
- Your annual mileage: The more you drive, the more likely you are to be involved in an accident.
- Where you live: Drivers in big cities typically pay more for car insurance.
- Your age: Younger drivers usually pay higher premiums because they're less experienced.
- Your gender: Women tend to pay less for car insurance because they're less frequently involved in accidents.
- Your credit: Insurers in many states use credit-based insurance scores when setting premiums for car insurance.
Both auto dealers and state laws usually require you to have car insurance before you can drive your new car off the lot. Some insurance companies allow a grace period during which you can add your new vehicle to your auto policy. Car dealerships may also provide temporary insurance, which generally lasts anywhere from one week to one month, but this coverage may be limited.
Before heading to the dealership, check with your insurance company to see how they handle insuring a new car.
If you drive without insurance, you could be fined, have your driver's license suspended or end up in jail. Most states require a minimum amount of car insurance to legally drive. If your vehicle is leased or financed, the lender could repossess the car if you're found driving while uninsured. Should you cause an accident while driving without insurance, you could be responsible for hundreds of thousands of dollars in damages and may face lawsuits.
The Bottom Line
Car insurance may be expensive, but going without it can cost you much more if you're involved in an accident. Shopping around to find the best prices, looking for discounts and maintaining good credit can all help you cut the cost of car insurance so you can afford the protection you need.