How to choose the right, cheap car insurance for your budget

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In the United States, the average cost of car insurance is $1,674 per year for a full coverage policy. However, you might pay more or less based on a number of factors, including the auto insurance company you choose. If you are wondering how to choose the right cheap car insurance for your budget, it is important to compare providers, get personalized quotes and find a carrier that offers multiple discounts you can take advantage of.

How to choose the right, cheap car insurance

If you are looking for the cheapest car insurance, focusing on price is essential. However, you should also consider factors besides price to find the right car insurance company. There are a few things you should consider to help narrow down your options. While shopping for cheap car insurance, consider your location, your driver profile and the discounts you can qualify for.

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.

In addition, your driving record, including the number of at-fault accidents and moving violations you have received, will impact your car insurance rate. Generally speaking, safe drivers pay the lowest car insurance rates. If you have an SR-22 on your record, you might be required to purchase high-risk auto insurance, which usually has a 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, certain states do not allow insurance carriers to factor credit score into your premium, such as California, Hawaii, Massachusetts, Michigan and Washington. Additionally, Hawaii does not permit age as a rating factor.

Because car insurance quotes can vary significantly based on driver profile, getting multiple quotes is valuable. Insurance companies tend to weigh these factors differently, so if you have a low credit score, for example, you might 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. On the other hand, choosing a high deductible could lead to paying a considerably lower rate.

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. Know which discounts apply

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, can 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 smart student car insurance discount.

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.

Frequently asked questions

What is the cheapest car insurance company?

There is not one single car insurance company that is the cheapest for every driver. The cheapest car insurance company is the one that can offer you the lowest rate for the type and amount of coverage you need. This is why it is important to shop around and get multiple quotes.

Can I switch car insurance companies to get a better rate?

Yes, you are allowed to switch to another car insurance company if you feel like you are paying too much for coverage. In fact, switching providers after your premium has increased following a claim or traffic violation can help you avoid a major rate hike.

How do I purchase car insurance?

The process of purchasing car insurance is pretty simple. Most providers allow you to get a quote and buy a policy online. You will need to provide information about yourself and your vehicle, and after your quote has been calculated, you are given the option to purchase a policy and choose your coverage start date.

Written by
Elizabeth Rivelli
Insurance Contributor
Elizabeth has two years of experience writing for insurance domains such as Bankrate.com, The Simple Dollar, Coverage.com and NextAdvisor, among others. In addition to auto insurance, Elizabeth regularly writes about home insurance, renters insurance and life insurance. She also covers industry trends and general insurance education.
Edited by
Insurance Editor