Last updated: May 2023
When money is tight, reducing certain expenses becomes necessary. You might be tempted to cut spending on your auto insurance. However, maintaining continuous coverage is crucial, even when it feels like you can't afford car insurance. Proof of financial responsibility is an essential expense. In fact, canceling your car insurance to save money can worsen financial hardship in the long run. Here are some reasons why car insurance is vital, ways to save on your premiums, and tips to make coverage more affordable.
Why is car insurance important?
Car insurance protects you from many types of financial loss after an accident. It also helps you avoid serious legal consequences. Depending on the coverage you purchase, it can even cover the damages to your own vehicle. With the applicable coverages, your insurance would typically cover accident-related damages (after you meet any deductibles). However, without coverage, you'd be required to pay for any damages to your vehicle out of pocket. That's a significant benefit and why it's especially important to have car insurance when finances are stretched.
1. Protecting you financially
If you or a loved one have ever been in a car accident, you likely know how expensive they can be. But if you're still wondering how much a car accident costs, it's probably more than you think. Medical bills, replacement car parts, and repair shop labor can all add up quickly, and you don't want to be stuck paying thousands of dollars out of pocket. Accidents happen, and if you are found at fault, you may also be responsible for these expenses for the other party. Car insurance can protect you financially by helping to cover these costs. Even if auto insurance feels expensive now, paying for one wreck out of pocket would almost certainly put more strain on your bank account.
2. Covering damages
Car insurance can cover different types of incidents depending on which coverages you have. For example, liability coverage helps pay for other people's bodily injuries and property damage caused by an accident that is primarily your fault. Collision coverage helps pay to repair or replace your vehicle after it collides with an object, another car, or rolls over. Comprehensive coverage helps pay to repair or replace your vehicle if it's damaged by something other than a traditional accident (like fire damage, flood damage, contact with an animal, or theft). Uninsured/underinsured motorist coverage can come to your aid if you're involved in a crash with an uninsured driver or are a hit and run victim.
There are additional coverage options, which we'll discuss below, that are all similar in acting as a financial security blanket for you and your car.
3. Covering legal defense
It doesn't always happen, but sometimes a driver will file a lawsuit following an accident. If you are sued, your car insurance will cover your defense. Considering how expensive a lawsuit can be, paying for a car insurance policy could end up saving you money in this circumstance.
4. Meeting legal requirements
Every state requires its drivers to have proof of financial responsibility, meaning at minimum they can pay for other people's damages stemming from an accident they cause. Breaking insurance laws can result in serious penalties, like fines, jail time, and loss of vehicle registration. A car insurance policy is the easiest and most common way to comply with financial responsibility laws. In the end, your insurance premium is a small price to pay compared to these consequences.
5. Providing peace of mind
In addition to helping pay for damages and making sure you meet insurance requirements where you live, car insurance provides peace of mind. If you drive uninsured, you'll always be thinking about what would happen if you're involved in a car accident. So, even if you think you'll save money by not purchasing insurance, you'll be adding more stress to your daily routine and putting yourself at risk.
6. Access to additional benefits
When you purchase auto insurance, some companies give you access to additional coverages and products. Even if you're trying to cut costs, some of these potential add-ons (like term life insurance) could be something you plan to purchase anyways. You might even be able to bundle coverages and products and save money in the end. But purchasing auto insurance coverage is often the first step.
What can you do when you can't afford car insurance?
Auto insurance costs may feel unaffordable to you now, but affordable options are within reach. You can work toward a lower premium, adjust when and how you pay for your car insurance premium to make it feel more affordable, and more.
What affects my car insurance cost?
Before you look to save money on car insurance, it's helpful to familiarize yourself with the different factors that determine your rate. Here are some things insurers consider when they give you a car insurance quote:
- Demographics information: For example, if you're a young, inexperienced driver, you'll typically pay more for coverage than a veteran driver.
- Driving history: If you have a history of moving violations or accidents, you will probably pay more for coverage.
- Living and driving location: If you live in a busy city with lots of traffic and higher crime rates, you'll typically pay more for coverage.
- Your work: If you use your car for work, you might need commercial auto insurance for your vehicle.
- Vehicle type: New or specialized vehicles (like sports cars) are typically more expensive to replace, and, therefore, more expensive to insure.
- Type of coverage: Your rate increases as you add more coverage and increase your coverage limits.
- Credit history: If you have a poor credit history or record of missed payments, insurers will typically charge you more because you're seen as more likely to let your coverage lapse.
By understanding how car insurance rates are determined, you can work to make yours more affordable. Drive carefully and avoid traffic violations and accidents. Boost your credit score by making on-time payments and communicating proactively with your lender if you're having trouble making payments. Rate changes don't happen overnight, but taking the right steps now can save you money in the future.
Find the correct type of insurance.
When you're struggling to make payments, it's important to seek coverage for only necessary reasons. For example, if you're leasing or financing your vehicle, your lender typically requires you to carry collision and comprehensive coverage. However, if you drive an older, high-mileage vehicle that is fully paid off, you might decide the best insurance option is to purchase minimum liability coverage. Here are some different types of car insurance so you can assess what you really want and need.
- Bodily Injury Liability Coverage: Helps pay for other people's injuries (or your legal services if sued) after an accident that is your fault. Bodily injury coverage is required as part of minimum liability insurance.
- Property Damage Liability Coverage: Helps pay for damage to other people's property after an accident that is your fault. Property damage coverage is required as part of minimum liability insurance.
- Personal Injury Protection (PIP): Helps pay for your medical and related expenses caused by an auto accident, regardless of fault. PIP isn't available everywhere, and it's required in some states.
- Medical Payments Coverage (Med Pay): Like PIP, Med Pay also provides coverage for medical expenses stemming from a covered incident. It isn't available everywhere, but in some states it's required.
- Uninsured Motorist Coverage: Helps pay for your medical and related expenses if you're involved in a crash caused by an uninsured driver or the victim of a hit and run. It can also help pay for property damage in some states. In some places, uninsured motorist coverage is required.
- Collision Insurance: Helps pay to repair or replace your vehicle after it collides with another car or object, regardless of fault. It isn't required by law but might be required by your lender.
- Comprehensive Insurance: Helps pay to repair or replace your vehicle if it is damaged in a covered incident that isn't a collision (like flood damage, contact with an animal, or theft). It isn't required by law but might be required by your lender.
- Optional Coverages & Products: There are additional coverages and products, like towing coverage, roadside assistance, or medical payments coverage, that aren't required but some people wish to add to their policy.
Look for discounts.
One way to save money on car insurance is to research discounts you might be eligible to receive. For example, at Direct Auto, you could potentially save money if:
- You're an active military member.
- You're a full-time student with a “B” or better average.
- You're over the age of 55.
- You've been accident or violation free for at least a certain period of time.
- You have multiple vehicles covered on your policy.
These are just a few examples of the ways you could save. There are even more, but please be aware that discount availability varies from state to state and depends on the company you choose. You can also work toward a discount that you might not be eligible for today but could be in the future.
Find cheap car insurance.
When you're in a situation that leaves you feeling unable to afford car insurance, finding a cheap car insurance rate may seem like an obvious solution. But how do you find cheap car insurance, especially when you have a less-than-perfect driving history? Comparing car insurance rates is a great first step and we encourage you to start your search with Direct Auto. With Direct, you don't have to compromise on your coverage to get an affordable rate.
Look for low down payment insurance.
Many people are familiar with down payments as part of a payment plan for a house or car, but did you know that many auto insurance companies offer payment plans, too? If you're unable to pay for your auto policy in full, find an insurer that offers low down payment car insurance. For example, Direct Auto helps drivers start their policy for less with a low down payment. You might also choose a higher down payment upfront to lower your monthly payments. You might have heard of zero down car insurance, but this isn't an option with reputable insurers, so search for low down payment auto insurance instead.
Change your payment date.
If your payday currently falls after your car insurance due date, it may seem like you never have enough left over to cover the cost of your coverage. However, you could adjust your payment due date to fall around the same time you get paid, so you have the funds needed to cover the cost. Direct customers can pick their payment date, ensuring it falls at a time most convenient for their budget, and they have flexible payment options. You can change your payment due date by phone and in-store with a retail agent. If the change is requested after the current installment has already been billed, the change will apply to future installments but not to the current billed installment.
Ask your agent about reinstatement.
If your policy cancels due to nonpayment, you can rest easier knowing that some auto insurance companies will allow you to reinstate your policy. The window of time can vary by company and state from a few days to 30 days, but typically your policy can be reinstated or put back into place with no rate increase if you comply with the carrier's requirements, including paying what you owe within the reinstatement period. If you had a claim during the cancellation period, it won't be covered, but there are still several benefits to reinstatement, including:
- You won't have to go through the hassle of reapplying for insurance and risking a rate increase.
- Your current premium won't go up due to a lapse.
- In most cases, the cancellation won't need to be reported to the DMV.
- You'll maintain a record of continuous coverage.
Some of these factors will help you spend less down the line, and some will help make your insurance feel more affordable. It's always best to reach out to your insurance agent to find a solution before deciding you're unable to afford car insurance.
Never drive uninsured.
No matter what, even if you can't afford car insurance, don't drive a vehicle without proper coverage. It's illegal, and it puts you and others at serious health and financial risks. The penalties are often severe, as we discussed above. If you're uninsured, try to arrange alternate transport while you search for an affordable insurance provider that's willing to work with you, regardless of your circumstances.
Where can I get cheap insurance?