For many drivers looking to save, finding budget car insurance is a top priority. The average annual cost of car insurance is $2,014 for full coverage and $622 for minimum coverage, but your rates may vary greatly based on your location, vehicle type, driving record and more. So, how can you choose the right cheap car insurance for your budget? Bankrate’s insurance experts break down the factors that go into your car insurance rate and strategies that may help you get the coverage you need at a price you can afford.
How to choose the right, cheap car insurance
If you are looking for the cheapest car insurance, price may be your top priority. However, knowing how to choose the right car insurance company often requires considering more than just your premium. The following tips may help you find a company with low rates that meets your coverage needs.
1. Consider your vehicle and driving record
Your car insurance premium is based on many factors, including the make and model of your vehicle, the age of your vehicle, the mileage and its safety features. Because older vehicles usually have a lower value, they are often cheaper to insure than newer cars with more expensive parts and repair costs. Plus, you may be able to forego full coverage if the value of your vehicle is close to what you would pay for full coverage car insurance for a couple of years. Speaking with an insurance agent may help you determine what coverage options are right for you and your car.
In addition, your driving record, including the number of at-fault accidents and moving violations you have received, could have a significant impact on your car insurance rate. Generally speaking, safe drivers pay the lowest car insurance rates. If you have serious violations on your driving record that requires you to get an SR-22 certificate, you might be required to purchase high-risk auto insurance, which usually has a much higher premium.
2. Consider your personal factors
Besides your driving record, other personal factors will also impact your car insurance premium. These include where you live and, depending on your state, your age, gender and credit history.
Car insurance quotes can vary significantly based on your driver profile, so it may be valuable to compare quotes from a handful of carriers to see which could offer you the best rates. Each insurance company calculates rates differently and weighs each factor according to a unique formula. For example, one carrier may surcharge rates significantly for a speeding ticket conviction, while another may put more emphasis on your age and credit history when calculating rates.
3. Compare quotes based on coverage options
When shopping for an insurance company, comparing quotes may be one of the most helpful things you can do. In addition to your driver profile, your chosen coverage limits, endorsements and deductibles will also determine your rate. Requesting quotes for the same type and amount of coverage may help you get the most accurate comparison across carriers. It may be worthwhile to speak with an independent insurance agent who can gather multiple quotes for you and provide personalized customer service with your best interest — and budget — in mind.
The amount of car insurance coverage you need has a direct impact on your premium. As a general rule, the higher your coverage limits are, the more your policy will cost, but the greater financial protection you have if you need to file a claim. On the other hand, choosing high deductibles may help you secure a lower rate. However, you may want to consider whether you could afford to pay a higher deductible if you were to file a claim.
If you lease or finance your car, you will probably need to purchase a full coverage policy, which includes collision, comprehensive and liability. If you own your vehicle, you may have the option to purchase a cheaper minimum coverage policy that includes only the minimum coverage requirements for your state, but it will not offer as much financial protection.
Adding insurance endorsements may allow you to tailor your policy to meet your unique needs, but add-ons usually come at an additional cost. Insurance endorsements vary by company, but some common options include:
- Gap insurance: This covers the “gap” between what you own on your car loan or lease and the value of your vehicle in the event it is totaled or stolen and nonrecoverable.
- Custom equipment coverage: If you have added custom equipment to your vehicle, like lights, spoilers or wheels, this endorsement offers coverage for those additions.
- New car replacement coverage: If you have a fairly new vehicle that is deemed a total loss following a covered event, this coverage would pay to replace your car with a brand new model of the same vehicle.
- Rideshare coverage: If you drive for a rideshare service, this coverage adds extra financial protection when transporting passengers for commercial purposes.
4. Understand which discounts may apply to you
When choosing car insurance on a tight budget, you may want to pay close attention to the discounts offered by each company. Many car insurance companies offer discounts to help drivers get a better rate, but the discounts available are unique to each carrier. Here are some commonly available car insurance discounts:
- Multi-policy: Purchasing two or more policies from the same company, usually as a home and auto insurance bundle, may help you get a cheaper premium with some carriers.
- Multi-vehicle: If you insure more than one vehicle on your auto insurance policy, many insurance providers will lower your rate.
- Claim-free: Drivers who have no insurance claims on their record within the last several years can sometimes qualify for a claim-free discount.
- Paid-in-full: If you can afford to pay your annual or six-month premium upfront and in full, you might save on your rate with certain carriers.
- Good student: Drivers who get good grades in high school or college might qualify for a student car insurance discount.
- Telematics: Many carriers offer telematics programs, which monitor driving habits for both safe and risky behaviors behind the wheel. Safe drivers can often save on their premiums, but some companies may raise your rates if the program uncovers risky habits.
- Affiliation: Some insurance companies offer affiliation discounts for students or professionals. Examples of potential affiliations include professional organizations, alumni groups, businesses and military service.
If you qualify for multiple discounts, most insurance companies allow them to be stacked together, which lets you maximize savings if you qualify for more than one. You can ask about the discounts that are available so you know what you may qualify for when choosing a company. Applying discounts may help lower the cost of car insurance so you can get the policy you need without compromising your coverage.
5. Research trusted third-party ratings
Once you’ve found some carriers that could offer you the coverage you’re looking for at an affordable rate, you may want to look at third-party ratings for the providers you are considering. Some of the most notable and trustworthy organizations are J.D. Power, AM Best and Standard & Poor’s (S&P). By considering third-party ratings, you may better understand each company’s overall customer satisfaction and financial stability. These metrics may also give you an insight into digital tools offered by each carrier.
Frequently asked questions
Since each driver’s rates are calculated individually, there is no cheapest car insurance company for everyone. To find the cheapest car insurance company for you, it may be helpful to get several quotes from different companies to compare the options. This may allow you to see how each company’s rates and discounts differ for the same coverage selections. From there, you may be able to determine the cheapest car insurance company for your unique situation.
If you are looking for car insurance on a budget, there are some things you may be able to do to lower your cost of car insurance. Shopping around and comparing quotes with different companies may help you find the best price on the coverage you need. Additionally, shopping around before your policy renews may help you see if you’re still getting the best rate. This may be especially important if you’ve recently experienced a big life change, like insuring a teen driver or buying a new car. Lastly, maintaining a clean driving record and being aware of how other rating factors, like credit history, may impact your premium in your state could help you maintain low rates over time.
Switching car insurance companies is one of the best ways to potentially get a better rate. In many cases, insurers raise rates a little each year. However, because rates are set based on each insurer’s unique underwriting evaluations, it’s possible to find other insurers with more competitive rates for your personal factors. Before automatically re-signing your current auto policy at renewal time, take some time to shop around, compare quotes and see if any insurers offer more affordable coverage or have more applicable discounts.
Yes, typically cars that are less expensive are cheaper to insure than high-value vehicles, but this may not always be the case. This is because the insurable risk is reduced by the fact that the vehicle would cost less to repair or replace in the event of a claim. On the other hand, many other factors such as safety ratings also influence rates, so some cheaper cars may still be expensive to insure. If you’re considering a new vehicle, it may be helpful to compare quotes for the models you are considering to see how each may impact your rates.