Navigating Roads Without Auto Insurance: Managing The Risks

Auto insurance is a necessity, but it can be expensive. If you can't afford it, there are several options to consider. Firstly, don't cancel your policy or drive without insurance, as this can lead to legal repercussions and hefty fines. Instead, contact your insurance company to discuss payment options and discounts. You can also shop around for a new policy, as rates vary across insurers. Increasing your deductible, reducing coverage, and comparing prices can help lower costs. Additionally, consider pay-per-mile insurance if you drive infrequently. Improving your credit score and maintaining a clean driving record over time can also lead to cheaper rates.

Don't cancel your policy

While you may be tempted to cancel your auto insurance policy if you can't afford it, this could have serious consequences. Here are some reasons why you shouldn't cancel your policy:

Legal Requirements

In the US, all states except Virginia require most drivers to have some level of auto insurance. Driving without insurance is illegal and can result in fines, suspension of your license, and even jail time. The specific penalties vary by state, but they can be costly and impact your ability to drive legally.

Financial Risks

If you cause an accident while uninsured, you will be responsible for all the costs associated with the accident, including repairs, medical bills, and legal fees. This can quickly add up to thousands or even hundreds of thousands of dollars. If you are unable to pay, the other party may sue you, leading to further financial difficulties.

Insurance Lapses

Letting your insurance policy lapse can have long-term consequences on your future insurance costs. Starting a new policy after a lapse is usually more expensive than maintaining continuous coverage. Additionally, an insurance lapse may result in your state requiring you to file an SR-22 form, which can stay on your record for several years and make it more difficult to find insurers willing to cover you.

Alternative Options

Instead of cancelling your policy, there are several alternative options to make your auto insurance more affordable:

• Contact your insurance company: They may be able to offer payment plans, discounts, or other options to help you manage the cost.
• Raise your deductible: Increasing your deductible will lower your premiums, but ensure you can afford the higher deductible in the event of a claim.
• Reduce your coverage: If you have an older car, you may not need comprehensive and collision coverage. However, consider your ability to replace the car if it's totaled.
• Look for discounts: Many insurers offer discounts for various reasons, such as safe driving records, student discounts, or bundling policies.
• Shop around: Compare quotes from multiple insurance companies to find the best rates and discounts.
• Improve your credit score: Insurance companies may use your credit score to determine your rates, so improving your credit can help lower your premiums over time.

Contact your insurance company

If you can't afford your car insurance, it's important to contact your insurance company as soon as possible. They may allow you to delay a payment or combine it with future payments. Insurers typically offer a grace period for late payments, but this varies by company and state, so get in touch with your provider to understand your options.

It's also worth checking with your insurance company about any discounts they offer. You may be able to save money for a variety of reasons, such as having a student with good grades, bundling your car insurance with another policy, or signing up for automatic payments and paperless billing.

If you've missed a payment, your insurance company must notify you before cancelling your policy. They will give you a grace period of about 10-20 days past the due date to make the payment, but this may differ depending on your state. During this time, your insurance will still be active. However, if you don't make the payment within the grace period, your coverage will lapse, and you will be driving without insurance.

Raise your deductible

Raising your deductible is a guaranteed way to lower your car insurance costs. A deductible is the amount you pay out of pocket before your insurance coverage kicks in. Typically, you can select a deductible ranging from $250 to $2,000.

If you opt for a higher deductible, you can lower your premiums, but this means you must pay more out of pocket before your insurance coverage begins. For example, if you have a $500 deductible and your car sustains $1,500 of damage, you will pay $500 and your insurer will cover the remaining $1,000.

Before raising your deductible, ensure you can afford the higher amount in the event of a claim. You should also consider the value of your vehicle. If your car is only worth a few hundred dollars, a high deductible may not make sense because the insurance payout may be less than what you pay in premiums over a year.

If you are a consistently safe driver who hasn't filed a claim in the past or you don't drive often, a higher deductible may be a good option. Increasing your deductible can save you hundreds of dollars a year.

Change your coverage

If you can't afford car insurance, you should consider changing your coverage. This can be done by reducing your coverage, raising your deductible, or both.

Reduce your coverage

Purchasing collision and comprehensive coverage for an old, paid-off car is not always worth the cost. For example, if your deductible is $500 and your car is worth $2,000, the most your insurance would pay if the car were totaled is $1,500, which may be less than you pay in insurance premiums over the course of a year. If you're struggling to pay car insurance, consider dropping extras such as rental reimbursement coverage, windshield replacement coverage, or roadside assistance.

Raise your deductible

Your car insurance deductible is the amount of a claim that you're responsible for before your insurance kicks in. Typically, you can select a deductible ranging from $250 to $2,000. Opting for a higher deductible can lower your premiums, but it means you must pay more out of pocket before insurance kicks in. Before raising your deductible, be sure you can afford to pay the higher amount in case of a claim.

Drop comprehensive and collision coverage

If you drive an older car and your policy includes comprehensive and collision coverage, you can likely drop both as they only pay out up to your car's market value, minus your deductible. For example, if you drive a car worth $1,000 and your deductible is also $1,000, you won't receive a cash payout from a comprehensive or collision claim.

To get the cheapest car insurance possible, carry only your state's required minimum amount. Good drivers with minimum coverage pay an average of $561 per year compared to $1,630 for full coverage. It's important to note, though, that in many states, minimum coverage only includes liability insurance, which pays others' medical bills and expenses after a crash you cause, up to your policy limits. You'll be responsible for any damage done to your car.

Shop for a new policy

Shopping for a new policy is a great way to save money on auto insurance. Here are some tips to help you get the cheapest rates:

• Compare quotes from multiple insurance companies: Getting quotes from at least three different insurance providers will help you find the best rate. Don't just look at the price; also, consider the coverage offered and the reputation of the company.
• Look for discounts: Many insurance companies offer a wide range of discounts. For example, you may be eligible for discounts if you have a good driving record, own a home, or are a student with good grades. Additionally, ask about bundling discounts if you purchase multiple types of insurance from the same company, such as home and auto insurance.
• Improve your credit score: In most states, insurance companies use your credit-based insurance score to set your car insurance rates. Taking steps to improve your credit score, such as paying bills on time and keeping credit card balances low, can help lower your insurance costs over time.
• Consider pay-per-mile insurance: If you don't drive often, pay-per-mile insurance might be a cheaper option. This type of insurance charges a monthly base rate plus a per-mile fee, so you only pay for the miles you drive.
• Change your coverage: If you have an older car, you may not need comprehensive and collision coverage, as they only pay out up to your car's market value minus your deductible. Instead, consider carrying only the minimum amount of coverage required by your state, which typically includes liability insurance.

Frequently asked questions