Auto Insurance At $50: Affordable Or Expensive?

The cost of car insurance varies depending on factors such as location, age, driving history, and vehicle type. While it is challenging to find full coverage for $50 a month, liability-only insurance can be obtained for as low as $46 per month. The national average cost of car insurance is $194 for full coverage and $53 for minimum coverage per month. To get the cheapest car insurance, it is recommended to shop around, take advantage of discounts, maintain a good credit score and a clean driving record, and opt for higher deductibles.

Live in a state with lower insurance rates

The cost of car insurance varies from state to state, and living in a state with lower insurance rates can help you find cheaper car insurance. The average state-by-state auto insurance premiums vary a lot. For example, Michigan might average over $2,800 for an annual, basic collision policy. That same coverage in South Dakota might cost less than half of that.

• Maine: Less than $925
• New Hampshire: Under $975
• Ohio: Around $1,000
• Wisconsin: Less than $1,025
• Iowa: Around $1,100

If you don't live in one of these states, there are still other ways to lower your rates. Opting for state minimum liability-only insurance for a car you don't drive much with a high deductible can push your rates down to $50 per month or close to it.

The car insurance industry is highly competitive, so shopping around for the best rates and plans can help you find the cheapest auto insurance rates in your state.

Drive a car that's cheap to insure

The type of car you drive is a significant factor in determining your insurance rates. If you're looking for cheaper insurance, there are certain makes and models you may want to consider.

SUVs and trucks are cheaper to insure, on average, compared to sedans. The cheapest cars to insure include the Subaru Outback, Honda CR-V, Honda Pilot, Ford Escape, and Honda Odyssey. The Subaru Outback, in particular, has an average annual premium that is 25% lower than the national average.

When it comes to specific models, the 2021 Ford Bronco is the cheapest to insure in 2024, with an average full-coverage cost of $2,192 per year or $183 per month. The 2021 Honda CR-V Hybrid and 2021 Subaru Crosstrek are also among the cheapest models to insure.

If you're looking for a specific car make with cheap insurance, Mazdas, Chryslers, and Subarus are the cheapest to insure, with average monthly rates under $255.

In addition to the type of vehicle, other factors that influence insurance rates include the age of the car, trim level, safety features, car theft rates, and the vehicle's repair costs and market value. Newer cars with advanced safety features often have lower premiums, but this can be balanced out by higher repair costs. Vehicles with high repair costs, poor safety records, or a lack of anti-theft features will likely cost more to insure.

When choosing a car to keep insurance costs down, consider a vehicle with standard components, strong safety ratings, and features like airbags, anti-lock brakes, and seat belts. Additionally, look for cars that cause minimal damage to others in accidents and offer good protection to passengers.

While it's important to consider insurance costs when choosing a car, don't base your decision solely on price. The cheapest cars to insure typically perform well in crash tests, but they may not be the right choice for your specific needs. It's crucial to find a balance between cost and finding a vehicle that suits your lifestyle and preferences.

Raise your credit score

A credit score is a number that creditors use to determine your credit behaviour, including how likely you are to make payments on a loan. Having a high credit score can make it easier to get a loan, rent an apartment, or lower your insurance rate.

• Make on-time payments: Your debt payment history accounts for 35% of your FICO score and is the most important credit score factor. Payment history includes on-time, late and missed payments, all of which are reported to one or more of the national consumer credit bureaus (Experian, TransUnion and Equifax). Always make payments on time to help improve your credit score.
• Pay down revolving account balances: How much you owe accounts for 30% of your FICO score, and your credit utilisation rate—the percentage of available credit you're using on revolving credit accounts such as credit cards—is a major element. While some experts recommend keeping your utilisation rate below 30%, there's no hard-and-fast rule. Aim to keep it as low as possible.
• Don't close your oldest account: The length of your credit history makes up 15% of your FICO score and is heavily influenced by the age of your oldest account and the average age of all of your accounts. Closing a credit card can hurt your credit score, especially if it's one of your oldest.
• Diversify the types of credit you have: Credit mix accounts for 10% of your FICO score and involves managing different types of credit. For example, someone with a mix of credit cards, an auto loan and a mortgage loan will have a stronger credit mix than someone with just one credit card.
• Limit new credit applications: Each time you apply for credit, the lender will run a hard inquiry on one or more of your credit reports, which can knock a few points off your credit score. Only apply for credit when you need it to avoid too many hard inquiries.
• Dispute inaccurate information on your credit report: Inaccurate credit report information can negatively impact your credit score. Disputing errors on your credit report can help you improve your credit. You're entitled to free weekly reports from each of the three major credit bureaus (Equifax, Experian and TransUnion). Check for mistakes and dispute them with the credit bureau.
• Become an authorised user: If you're new to credit or have a low score, having a loved one add you as an authorised user on their credit card can positively impact your credit score.

Eliminate unneeded coverage

If you want to reduce your auto insurance costs, consider eliminating unneeded coverage. Dropping certain types of coverage can lower your monthly payments, but it's important to ensure you still meet the minimum insurance requirements in your state. Here are some types of coverage you may want to consider eliminating:

• Bodily Injury and Property Damage Liability: These coverages provide protection if you are at fault in a car accident. However, if you don't drive frequently or feel you can cover potential costs yourself, you may consider eliminating this coverage.
• Roadside Assistance: If you already have roadside assistance through another service, such as AAA or your credit card, you may not need this coverage from your auto insurance provider.
• Personal Injury Protection (PIP): If your state doesn't require PIP, and you have good health insurance, you may be adequately covered for accidents without this additional protection.
• Uninsured/Underinsured Motorist Coverage: Evaluate the likelihood of needing this coverage based on the percentage of uninsured drivers in your state.
• Rental Car Reimbursement: If you have access to an extra car or reliable public transportation, you may not need reimbursement for a rental car while your vehicle is being repaired.
• Collision and Comprehensive Coverage: If you own your car outright and it's an older model worth only a few thousand dollars, you may consider forgoing this additional protection.
• GAP Insurance: If you don't lease your car and don't have an auto loan, GAP insurance may be unnecessary.

Remember, eliminating certain coverages may leave you responsible for more out-of-pocket expenses in the event of an accident or vehicle damage. Carefully review your other plans and memberships to ensure you have the necessary coverage before making any changes to your auto insurance policy.

Raise your deductible

Raising your deductible is a great way to lower your insurance premium. A deductible is the amount you pay out of pocket before your insurance coverage kicks in. Typically, you can choose a deductible of $250, $500, or $1,000, but it can go as high as $2,500. The higher the deductible, the lower your insurance premium will be. For example, increasing your deductible from $500 to $1,000 may lower your car insurance rate by 10%. This is because, with a higher deductible, you are assuming more of the financial risk if you get into an accident.

However, it is important to note that raising your deductible means you will have to pay more each time you file a claim. Therefore, it is crucial to ensure you have enough savings to cover the higher deductible in case of an accident. Additionally, it is not advisable to have a high deductible if your car is only worth a few thousand dollars. In that case, you would end up paying a significant portion of the car's value as the deductible.

If you live in certain states, you can save a significant amount by raising your deductible. For example, in Michigan, Washington D.C., North Dakota, Oklahoma, California, Delaware, Montana, Wisconsin, South Dakota, and Wyoming, you can save hundreds of dollars a year by increasing your deductible from $250 to $1,000.

In conclusion, raising your deductible can be a smart way to lower your insurance premium, but it is important to ensure you have the financial means to cover the higher deductible if needed.

Frequently asked questions