What If You Can't Afford Car Insurance?

What If You Can't Afford Car Insurance?
••• krisanapong detraphiphat/Moment/GettyImages

The first rule is: If you don't have car insurance, don't drive. Catch a ride with someone else, take public transportation or even ride a bicycle. The risk of something bad happening is simply too high.

In addition to being against the law in most states, if you drive without insurance and cause an accident, the financial consequences could be devastating.

So what can you do if you can't afford auto insurance. Let's look at several things you can do to get you back in your car and driving without fear.

Why You Need Car Insurance

Not having car insurance can lead to dire consequences. All states, with the exception of New Hampshire, require drivers to have insurance. Each state has its own rules for not carrying insurance. But, you could face fines, have your license suspended or even serve jail time if you are a frequent offender for driving while uninsured.

If you have coverage, but your insurer drops your policy because you couldn’t afford the premiums, this lapse in coverage appears as a black mark on your record. Your original provider may not reinstate your policy, even if you make up the missed payments, and it will be harder to get insurance when you start shopping with other companies.

To make matters worse, your insurer could turn your past-due account over to a collection agency, causing damage to your credit score.

If you have a leased vehicle and your insurance coverage is canceled for lack of payment, your vehicle could be repossessed.

The bottom line is, if you can't afford your car insurance premiums, you shouldn't be driving. So let's see what steps you can take to make car insurance payments more affordable.

Get Quotes From Several Companies

The first step is to look at several auto insurance comparison websites and get quotes. There are a lot of car insurance companies to choose from. Most of them provide similar coverage, but at vastly different premiums.

Some car insurance companies have attractive premiums for young drivers, while others might have better premiums for middle-aged drivers with an accident or two in their driving history.

You have to find the insurance company that provides the best fit for your age, location and driving habits.

Buy a Less Expensive Used Car

Before you decide that your budget can handle the payments on a new car and sign the contract with the dealer, consider how much it will cost to insure that new car. Insurance rates for used cars are cheaper than the premiums for new cars. Common sense tells you that it's cheaper to get insurance for a used Honda than for a new Mercedes. Larger, more expensive cars cost more to insure than smaller cars.

Look for Discounts

All insurance companies offer a range of discounts, so look for the ones you may qualify for.

Here are a few of the most common discounts:

  • Safe driver with no traffic tickets or accidents
  • Student with good grades
  • Military discount
  • Discount for completion of a defensive driving course
  • Low-mileage discount
  • Discounts for members in certain clubs and organizations, like university alumni
  • Occupations with low-risk drivers, such as engineers, scientists and pilots

Drive Safely

Accidents and traffic tickets can drive up your insurance premiums. If you get a traffic ticket or have been at fault in a car accident, you may have the opportunity to attend traffic school and have it dismissed or get the number of violation points reduced. Keeping traffic tickets off your driving record saves you hundreds of dollars over the years.

Pay-Per-Mile Programs

If you're a good driver and drive fewer than ​10,000 miles​ per year, your insurance provider could offer you a discount.

Some insurance companies have a program with premiums based on the usage of a vehicle. With this type of program, the insurer installs a telemetric device in your car and tracks your driving habits. This device records how many miles you drive, when you drive and your driving habits.

If your driving history meets the criteria set by the insurance company, your annual insurance premium cost could be less.

Eliminate Unnecessary Coverage

Look at your car insurance policy to find out if you're paying for coverage that you don't need. For example, if you rarely travel by plane, you don't need coverage for rental cars.

Another example. If you're driving an older car that wouldn't be worth repairing if you had an accident, you might be able to eliminate collision coverage.

Raise Your Deductible

Increasing your deductible is a quick way to lower your premiums. Raising your deductible, say from ​$500​ to ​$1,000​, could save you upwards of ​10 percent​ in your annual premiums.

But if you're short on cash, this might not be the best plan. If you raise your deductible, you get a lower premium, but you need to have enough cash in reserve to cover the deductible amount in the event of an accident.

Change Your Payment Plan

Insurance companies give you a discount when you make it easier for them to collect their money and reduce costs. Set up your premium payments on automatic deductions from your bank account and go paperless to save money. This helps you avoid missing payments and gives you one less piece of paper to handle.

Improve Your Credit Rating

This is a longer-term plan, but improving your credit score can lower your insurance premiums. Insurance companies base part of the premium on the credit rating of a customer.

You can improve your credit rating by making sure all of your bills are paid on time and reducing the amount utilization of your credit cards.

If you own and drive a car, you must have insurance. This means if you can't afford to pay the insurance premiums, you can't afford to drive a car. When you purchase a car and make room in your budget for a car payment, you should also budget in your insurance premiums.

Fortunately, there are several ways you can reduce your car insurance premiums. Buying a reasonably priced used car and shopping around with several insurance companies to get the best quote is a good start.

You could also consider using a car insurance broker. They know the car insurance industry and can guide you to the insurer that best fits your profile. Insurance brokers also may be aware of special discounts and promotions that consumers can't access.