How to choose the right cheap car insurance for your budget
When you’re building a monthly budget, it can be frustrating to see how much of your money goes to unavoidable expenses like auto insurance. Smart shopping can help you find car insurance that fits your budget, giving you a level of coverage you’re comfortable with while freeing up your finances in other areas.
How to choose the right car insurance for your budget
The right car insurance for your budget might be the cheapest insurance you can find, but that’s not necessarily the case. When weighing insurance carriers, you may want to consider other factors — customer service, claims handling, convenience features and your own coverage needs — to help you settle on budget auto insurance that balances benefits and price.
1. Analyze your current budget
Start by taking stock of what you’re paying for car insurance now — if you have an active policy — and how it fits into your overall monthly expenses. For many Americans, insurance premiums account for around 12 percent of their monthly budget. According to the 2025 True Cost of Auto Insurance report, Americans spend an average of 3.39 percent of their median household income on auto insurance alone. If you’re paying more than that, or if you just want to free up room elsewhere in your budget, you may want to look for savings opportunities.
You may also be in a good position to adjust your car insurance budget if you’ve recently made certain life changes, such as:
- Buying a new car
- Moving to a state, city or neighborhood
- Adding a driver to your policy
- Improving your credit score
- Getting married
Any of these life events has the potential to change your insurance profile, which could mean you’re eligible for new discounts or lower rates. In some cases, a change to your profile could also mean that you have higher coverage needs or face steeper rates.
2. Understand your personal rating factors
Insurance companies set the price of your car insurance based on a wide range of personal factors run through proprietary underwriting algorithms. These factors include where you live, how long you’ve been driving, the vehicle you’re insuring, how much you drive and whether you have any recent accidents, tickets or claims. Depending on where you live, insurers may also look at your gender, credit history and age.
Understanding the risk factors that can increase your insurance costs — such as a driving history of less than three years or a vehicle associated with high rates of theft — can help you prepare to compare quotes from multiple carriers. Because each insurance company puts a different weight on each risk factor, you’ll likely find that while some companies return high quotes, you’re able to find more affordable rates from other carriers that view your profile more favorably.
3. Compare quotes based on coverage options
When comparing quotes, don’t just look at the quoted price — take time to review your coverage options from each insurer. While standard coverage like liability, comprehensive and collision isn’t likely to differ significantly between carriers, add-on coverage options can vary and could help to edge one company out in front of the pack.
If possible, it’s usually helpful to request quotes for the same coverage limits, deductibles and endorsements. If you lease or finance your car, you will probably need to purchase a full coverage policy, which typically 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. If you’re not sure how much car insurance to shop for, you may want to speak with an independent agent or review your current limits.
But once you’ve met your basic coverage needs — the ones essentially any licensed auto insurer can cover — you may find yourself drawn to optional add-ons. Adding insurance endorsements may allow you to tailor your policy to meet your unique needs, but they 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 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.
Finding local and regional insurers can be a serious boon when looking for cheap car insurance. While not always, these companies are often well-geared toward local coverage needs, sometimes with specialized perks, discounts or other features that would be difficult to find in larger insurance companies. Working with an independent agent or broker can help when seeking a regional insurer that caters to your specific needs while offering a competitively low rate.
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 depend on the 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.
- 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.
- Paid-in-full: If you can afford to pay your annual or six-month premium up front and in full, you might save on your rate with certain carriers.
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.
I pay every six months ($600, for example) for the [paid in full] discount, and that bites if you’re not prepared. So I put the monthly cost ($100) in a sinking fund. I ‘pay’ the same amount each month ($100), whether it’s due or not.— Johna Strickland, Bankrate investing editor
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.
Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Compare auto insurance rates
Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Frequently asked questions
Up next
The cheapest car insurance companies