How to choose the right car insurance for your budget?

Many Americans are on a budget, and with inflation continuing to rise, those budgets are getting tighter than ever. One constant in many peoples’ budget is car insurance, as almost all states require a minimum amount of coverage. To give you an idea of the average rate Americans pay, the average annual cost of car insurance is $1,771 for full coverage and $545 for minimum coverage. So, how can you choose the right, cheap car insurance for your budget? Bankrate’s insurance experts help you understand the factors that go into your car insurance rates and what you can do to get the best rate to fit your budget.

How to choose the right, cheap car insurance

If you are looking for the cheapest car insurance, focusing on price is essential. There are a few things worth considering to help narrow down your options, such as your location, your driver profile and the discounts that might be available to you.

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, saving even more by removing coverage options you no longer need. Talk to your insurance agent to see 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 require you to get SR-22 insurance, 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 impact your car insurance quote. Some personal factors include your age, credit score, state, ZIP code and the number of miles you drive annually. However, California, Hawaii, Massachusetts and Michigan ban or restrict the use of credit as a factor in your car insurance rates, while Hawaii and Massachusetts do not permit age as a rating factor. California and Michigan also restrict the use of ZIP codes to determine rates.

Because car insurance quotes can vary significantly based on driver profile, getting multiple quotes is valuable. Each insurance company calculates rates differently and weighs each factor according to a unique formula. What that means is that if you have certain issues that may cause you to pay more for insurance, like a minor fender bender on your driving record, you may find that one provider offers much cheaper rates than another.

3. Compare quotes based on coverage

When shopping for an insurance company, comparing quotes is one of the most helpful things you can do. In addition to your driver profile, your chosen coverage limits, add-ons and deductibles will also determine your rate. Make sure to get several quotes for the same type and amount of coverage for accuracy.

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 a high deductible could help you secure a lower rate. However, you should consider whether you can afford to pay a higher deductible if you were to get into an accident.

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 minimum coverage only, but it will not offer as much financial protection.

4. Understand which discounts may apply to you

As you compare insurance providers, pay close attention to the discounts offered. 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, could help you get a cheaper premium.
  • 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.
  • Pay in full: If you can afford to pay your annual premium upfront and in full, you can probably save some money on your premium.
  • Good student: Drivers who get good grades in high school or college can often 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 that can increase the chance of an accident.

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. 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

In addition to car insurance quotes and coverage options, it is also a good idea to look at third-party ratings for every provider 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 are able to get a deeper understanding of the company’s overall customer satisfaction and financial stability, which show a company’s past ability to pay claims and meet financial obligations.

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