What if car insurance payment cost more than I can afford?

Almost every state requires drivers to carry auto insurance. Suggestions on how to lower premiums and find room in your budget if you can't pay your premiums

what if I can't afford Car Insurance payments?

If you decide to purchase and own a car, paying premiums for car insurance needs to be factored into the total cost of ownership. Depending on several factors, car insurance can be expensive. Unless you live in Mississippi, New Hampshire or Virginia, state law requires everyone who owns and operates a car to purchase liability insurance or show some other form of financial responsibility.

Car accidents are expensive, not only for individuals but for society as well. If you're on the hook for medical expenses, legal fees, and property damage, the grand total can be sky-high. Motor vehicle crashes are a leading cause of death in the U.S. More than 2.5 million drivers and passengers were treated in emergency departments as the result of being injured in motor vehicle crashes in 2012. A National Highway Traffic Safety Administration (NHTSA) study from 2014, shows motor vehicle crashes have an $871 billion economic and societal impact on U.S. citizens.

Purchasing a Vehicle

Plan ahead and be realistic about the amount of car you can afford. It’s important to keep in mind that in addition to your car payment, gas costs and maintenance, you’ll need to have enough funds in your budget to cover monthly car insurance premiums. According to Kelley Blue Book, the estimated average price for new light vehicles in the United States was $32,307 in May 2014, up 2.1 percent from May 2013. Used car prices averaged approximately $18,000 in June 2014. That’s a difference of over $14,000 between purchasing a new versus used automobile.

So, how much can you afford? Interest.com, a leading personal finance site, recommends using a "20/4/10 rule." This rule contains the following guidelines:

  • Make a down payment of at least 20% (ok to include the value of your trade-in)
  • Cap any loans you enter into at 4 years
  • Keep your total monthly vehicle expenses (including principal, interest and insurance) to less than 10% of your gross income

Instead of purchasing a car you’ll need to lease or finance, consider buying one you can afford to purchase outright. This will lower your car insurance payments as you’ll no longer be required to carry both collision and liability coverage.

If You Can't Afford Your Car Insurance Payments

Shop around and compare car insurance quotes from multiple insurance companies. Remember to ask for a list of all discounts provided. Sometimes car insurance companies offer discounts you may not be aware of.

  • Bundling – purchase multiple types of insurance from the same carrier
  • Club memberships – some clubs and organizations have contracts with various insurance companies to provide discounts to their members
  • Defensive driver – take a defensive driving course and pass it
  • Equipment – if your car has certain types of safety or security equipment installed, a discount may be coming your way; even if it’s an aftermarket installation
  • Good student – most car insurance companies believe that good students are better drivers, so you may want to hit the books harder
  • Good driver – could be as much as 20%, if you qualify, so avoiding moving violations is key to achieving this discount
  • Low mileage – consider parking your car and taking the bus to work, it could save you up to 15% on car insurance premiums
  • Military – current or former military members and their families can save on payments
  • Multiple car – own more than one car? Get them all insured with the same car insurance company and save
  • Payment method – save a tree and money, sign up for automatic payments and electronic statements
  • Occupation – engineers, scientists, pilots, actors and artists are rewarded with lower premiums due to their low risk status; doctors, attorneys, lawyers, judges, real estate brokers, social workers, architects, executives and business owners pay more because they work longer hours and are considered more stressful careers

In addition to claiming all the discounts you may qualify for, another way to save on auto insurance premiums is to determine what your state’s minimum levels of liability coverage is and match it. Most insurance agents won’t recommend this as car values and medical costs increase every year, making having the bare minimum coverage a risky bet. If you’re willing to take this risk and can locate an agent willing to write the policy, it can drastically reduce your car insurance payment.

If you've fallen on hard times—and you're not alone—don't treat your auto insurance as an optional expenditure unless you can give up driving altogether. For most Americans, this isn't a realistic option. If you have to, temporarily trim down the policy you have to the bare essentials, but don't forget to increase them as soon as you can afford it.

Compare car insurance quotes from top insurance companies and find out how much you could save.

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