Car insurance is mandatory in almost every state, but that doesn’t mean it’s affordable for everyone. When money is tight, paying hundreds of dollars every month for auto insurance can seem impossible. Unfortunately, canceling your policy or letting it lapse is not a wise solution.
Driving without insurance can lead to fines, license suspension, impound fees, and serious financial risks if you cause an accident. The good news is there are better options to make car insurance more affordable even with limited income.
This guide explains steps to take if you’re struggling to pay your car insurance premiums. We’ll cover:
- Consequences of uninsured driving
- Ways to lower your insurance costs
- Alternatives if you still can’t afford a policy
Why You Shouldn’t Drive Uninsured
Letting your auto insurance policy cancel due to non-payment or voluntarily dropping coverage may seem like the only choice when cash flow is tight. However, driving without insurance is illegal in every state except New Hampshire and Virginia. Getting caught uninsured can lead to:
Fines – Most states fine drivers $200 to $500 for a first offense, up to thousands for repeat offenses.
License suspension – Driving privileges will be revoked until you prove you have insurance.
SR-22 requirement – High-risk drivers may need to file proof of insurance for 3+ years.
Impound fees – Law enforcement can tow and impound an uninsured vehicle.
Jail time – At least a month in jail for multiple offenses.
No coverage for accidents – You’ll pay all costs out-of-pocket if you cause an accident.
Allowing insurance to lapse also makes it more expensive to get a new policy in the future. Overall, driving without insurance simply isn’t worth the risk and consequences.
Ways to Reduce Car Insurance Costs
Before concluding you can’t afford auto insurance, take steps to lower your premiums. Here are some of the most effective ways to save:
Compare quotes – Rates vary significantly among insurers. Shop around for the best deal.
Raise deductibles – Opting for a higher deductible saves money on premiums.
Drop extras – Eliminate add-ons like rental reimbursement and roadside assistance.
Reduce coverage – Downsize to liability-only insurance if your car has low value.
Seek discounts – Take defensive driving, bundle policies, use pay-in-full discounts.
Improve credit – Insurers use credit data. Boosting your score can lower premiums.
Maintain a clean record – Avoid tickets and claims to qualify for the lowest rates.
Use pay-per-mile insurance – If you don’t drive much, this can save over standard policies.
Use public transportation – Reduce mileage to save money on insurance.
Shopping around and optimizing your policy can potentially chop your premiums in half. But what if you’ve exhausted all options and still can’t swing the lowest available rates? Consider these alternatives.
Alternatives If You Still Can’t Afford Car Insurance
Going completely without insurance isn’t an option, but you have some alternatives in situations where even the cheapest policy remains out of reach.
Set Up a Payment Plan
Contact your insurance company to ask about arranging a payment plan if you’re struggling with upcoming bills. Many insurers allow policyholders to divide annual premiums into smaller monthly payments or defer one month’s bill to the next billing cycle.
This prevents the policy from lapsing while giving you more time to pay. Just be sure to discuss options before missing a payment because insurers can still cancel coverage.
Modify Your Budget
Look at your budget to find room for car insurance savings. Reduce spending on non-essentials like subscription services, cable packages, dining out, etc. Meal prep at home and limit entertainment expenses.
Building some wiggle room into your budget makes it sustainable to pay for a basic insurance policy. Apps like Mint, PocketGuard, and You Need a Budget can help manage spending.
Use Government Assistance Programs
People experiencing financial hardship may qualify for government assistance programs to help pay for necessities like transportation. Options include:
Food stamps/SNAP – Frees up income for car insurance premiums.
Medicaid – May allow dropping expensive health insurance if you qualify.
Section 8 housing – Subsidized rent costs help offset car insurance payments.
TANF – Temporary financial assistance for very low income households.
Unemployment benefits – If laid off from your job, provides income for bills.
Subsidized car insurance – CA, NJ and NY offer state-assisted low cost policies.
Check if you’re eligible for any federal or local assistance programs that could create room in your budget for basic car insurance.
Sell Your Car
As a last resort, you may need to sell your vehicle if insurance costs remain unaffordable even after exhausting all other options. Rideshare services like Uber and public transportation can serve as a temporary alternative in urban areas. Or, see if you can borrow a family member or friend’s car on occasion.
The key is weighing the overall transportation costs of owning, maintaining, gassing up and insuring a car versus using alternative means. If keeping your car doesn’t make financial sense, you’re better off selling it until your income increases enough to re-add auto insurance.
Maintaining State Minimum Coverage
Review the state auto insurance minimums where you live. Carrying only this basic liability coverage required by law keeps insurance costs to a minimum. If you have an older, low value vehicle, you can likely also drop comprehensive and collision coverage and exempt pricey add-ons.
The average annual cost for basic liability insurance is around $550 compared to nearly $1,700 for full coverage. Focus on maintaining at least the state-mandated minimum while reducing all other costs.
Reassess When Your Situation Improves
The steps above can help you legally minimize car insurance expenditures when money is extremely tight. However, restrictions like liability-only policies and high deductibles come with financial risks.
Be sure to reassess your situation periodically and add more robust coverages as your budget allows. Protecting your assets and income potential down the road is worth the extra costs of comprehensive coverage when affordable.
Explore Additional Ways to Save
Beyond the major reductions covered already, a few other miscellaneous tips can chip away at car insurance costs:
Buy discounted gift cards – Gift cards reduce out-of-pocket premium costs. Look for discounted gift cards online.
Pay annually – Paying your entire premium upfront saves on financing fees.
Negotiate medical bills – Slash copays and deductibles by negotiating costs with healthcare providers.
Use insurance appeals – Fight claim denials through provided appeals processes.
Learn DIY car maintenance – Do basic repairs yourself instead of paying a mechanic.
Buy discounted parts – Salvage yards and eBay offer deals on used auto parts.
Drive carefully – Safe driving avoids accidents and keeps rates low.
While it’s tempting to cancel or skimp on coverage, maintaining at least bare minimum auto insurance is essential. Following the guidance above reduces the chances of policy lapse or driving uninsured. Most importantly, prioritize insurance payments in your budget as a mandatory expense, even when it requires lifestyle sacrifices. Protect yourself and your finances with affordable coverage.
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