What if Car Insurance Costs More Than I can Afford?

Almost every state requires drivers to carry auto insurance. Here are suggestions on how to lower premiums and find room in your budget if you can't afford car insurance.

person with empty pocket

If you buy a car, you’ve got to buy car insurance, too.

OK, so that’s not entirely true. One state, New Hampshire, doesn’t require its drivers to carry car insurance. Every other state requires a minimum amount of liability coverage. So you’re more likely than not to have to buy it.

Which is important, because car insurance can be expensive.

That causes problems for a lot of people. In fact, it isn’t unusual for people to find they can’t afford car insurance insurance.

If that’s true for you, the first thing you should do is shop around to find the best insurance rates. After all, when you compare car insurance rates you can save hundreds of dollars a year.

That’s not all you can do to lower your premiums so you can better afford car insurance payments. Here are some more suggestions.

When You’re Buying a Car

The best way to ensure you can afford car insurance is to think about it when shopping for a vehicle. You have to plan ahead and be realistic about what you can afford.

Why? It takes more than a car payment to drive. There's also the cost of maintenance and gas. Plus, you need to have enough money to cover your car insurance premiums.

Of course, your car payment will be the biggest factor here. According to Kelley Blue Book the average “new light” vehicle cost $32,307 in the U.S. in May 2014,. Used car prices averaged about $18,000 in June 2014. That’s a difference of over $14,000 between buying a new car rather than a used one.

Not sure how much car you can afford? Interest.com suggests using the "20/4/10” rule:

  • Make a down payment of at least 20 percent (if you’re trading in a car, include its value here)
  • Cap any loans you enter into at four years
  • Keep your monthly vehicle expenses (including principal, interest, and insurance) to less than 10 percent of your gross income

If you really want to save, and if you can afford it, buy a car outright. That way you won’t have all of the extra costs that come along with financing or leasing a vehicle.

This also will lower your payments because you’ll no longer be forced to carry both collision and liability coverage.

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When You Can't Afford Car Insurance at Other Times

The most important thing to remember is that you should start by shopping around and comparing quotes from multiple companies.

While you do that, ask your contact for a list of all possible discounts. Sometimes insurance companies offer discounts you may not be aware of.

Speaking of discounts, here are some of the most common:

  • Bundling – purchase multiple types of insurance from the same company
  • Club memberships – some clubs and organizations have contracts with insurers to provide discounts to their members
  • Defensive driver – take and pass a defensive driving course
  • Equipment – usually offered to people who’ve added certain types of safety or security equipment to their cars
  • Good student – most insurance companies believe good students are better drivers and so reward them with better rates
  • Good driver – Drive safe and don't get tickets. You may see as much as 20 percent reduction in your bill
  • Low mileage – consider parking your car and taking the bus, as it could save you up to 15 percent
  • Military – many carriers offer current or former military members and their families discounted rates
  • Multiple car –  if you own more than one car, insure all of them with the same company. You can save a bundle
  • Payment method – sign up for automatic payments and electronic statements and you could save a tree and some money
  • Occupation – insurance providers give people in some jobs lower rates because they’re low risk. A few examples: engineers, scientists, pilots, actors, and artists

Another way to lower your car insurance payments is to match your state’s minimum levels of liability coverage. This is risky as most of these minimums were set years, if not decades, ago. Both car values and medical costs have risen sharply since then. So you could owe a lot of money if you go this route and cause an accident.

If you can find an agent who will write the policy, this will drastically cut what you pay.

Whatever you decide, take a few minutes to get a quote and compare quotes for the coverage you want.

One More Reason to Buy Car Insurance

Still looking for reasons to buy car insurance? Here’s a big one that should do a good job of convincing you.

Just like car insurance can be expensive, so can car accidents. This is especially true if you cause one. You could wind up on the hook for medical expenses, legal fees, and property damage. The resulting bill can be sky-high.

Car crashes are both common and deadly. For example, car crashes sent more than 2.5 million drivers and passengers to the ER in 2012. Also, a recent National Highway Traffic Safety Administration study found that accidents impacted Americans to the tune of $871 billion in 2014.


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