Why Car Insurance is Essential and How to Afford It

Car insurance is a crucial aspect of responsible vehicle ownership. It not only protects you financially but also ensures that you comply with legal requirements. However, the rising cost of auto insurance can be a burden for many. In this blog, we will explore why car insurance is important, the consequences of not paying for it, and practical tips to make it more affordable. If you need any mortgage services, O1ne Mortgage is here to help. Call us at 213-732-3074 for expert assistance.

Why Is Car Insurance Important?

In most states, having a minimum level of car insurance is a legal requirement. Typically, this includes liability insurance, which covers medical costs and property damage for other people involved in an accident you cause. Some states also mandate additional coverage such as uninsured or underinsured motorist coverage, medical payments coverage, or personal injury protection insurance.

If your car is leased or financed, your lender will usually require collision and comprehensive coverage to protect the vehicle from loss or damage due to collisions, theft, or natural disasters. Driving without car insurance can lead to severe penalties, including fines, license suspension, or even jail time in extreme cases.

Moreover, going without car insurance poses significant financial risks. If you cause an accident, you may have to cover the other party’s car repairs, medical bills, and more, which could amount to hundreds of thousands of dollars. If you can’t pay, the injured party could sue you. Additionally, if your car is stolen or damaged by a natural event, you’ll have to bear the repair or replacement costs yourself.

What Happens if You Don’t Pay Your Car Insurance?

If you fail to pay your car insurance, your insurance company may cancel your coverage. They are required to notify you before canceling your policy, and you generally have a grace period of about 10 to 20 days past the due date to pay your premium. This period may vary depending on your state, so check with your insurance carrier for details.

Besides canceling your policy, the insurance company may report your late payment to credit bureaus or send your account to collections, both of which can negatively affect your credit score. Canceled car insurance remains on your motor vehicle record for three to five years, and insurers may charge you higher premiums during this period as you are considered a high-risk driver.

What to Do if You Can’t Afford Car Insurance

Here are eight strategies to make car insurance more affordable:

1. Adjust Your Budget

When expenses rise, adjusting your budget can help. Look for ways to cut spending so you can afford car insurance. For instance, you might want to cancel unused subscriptions, eat out less often, or spend less on clothing.

2. Increase Your Deductible

Your car insurance deductible is the amount you pay out of pocket before your insurance kicks in. Opting for a higher deductible can lower your premiums, but it means you must pay more out of pocket in case of a claim. Ensure you can afford the higher deductible before making this change.

3. Reduce Your Coverage

Purchasing collision and comprehensive coverage for an old, paid-off car isn’t always worth the cost. For example, if you have a $500 deductible and a car 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 premiums over a year. Consider dropping extras such as rental reimbursement coverage, windshield replacement coverage, or roadside assistance instead.

4. Look for Discounts

Most car insurance companies offer a wide range of discounts. You might qualify for discounts if you go several years without accidents or tickets, own a home, take a driver safety course, are a student with good grades, or belong to certain organizations. Bundling multiple types of insurance, such as home and auto, can also lead to significant savings.

5. Drive Less

Many insurers offer low-mileage discounts for those who drive less than 12,000 miles per year. This may require reporting your odometer reading or using a tracking device. Another option is pay-per-mile car insurance, which charges a base rate plus a per-mile charge. Carpooling, taking public transit, and walking or biking can help you drive less and save money.

6. Change Vehicles

Car makes and models that are expensive to repair or replace, have poor safety ratings, or are frequently involved in claims typically cost more to insure. Alternative-fuel vehicles, cars with safety features, or cars with anti-theft devices may save you money on insurance. Consider how trading in your vehicle might affect your premiums.

7. Shop Around

Auto insurance premiums can vary widely from one company to another. Comparing quotes from several insurers can help you get the coverage you need at the best price. Ensure you’re comparing the same type and amount of coverage. Using tools like Experian’s free auto insurance comparison tool can streamline the process by gathering quotes from multiple companies in one place.

8. Improve Your Credit Score

Insurance companies in most states review your credit-based insurance score when setting your rates. These scores are based on factors similar to your consumer credit scores, such as outstanding debt and payment history. Improving your credit score by paying bills on time and reducing debt can help lower your insurance premiums.

The Bottom Line

Car insurance may be expensive, but going without it can cost you much more if you’re involved in an accident. Shopping around for the best prices, looking for discounts, and maintaining good credit can all help you cut the cost of car insurance so you can afford the protection you need.

For any mortgage service needs, O1ne Mortgage is here to assist you. Call us at 213-732-3074 to speak with one of our expert loan salespersons. We are committed to providing you with the best service and helping you achieve your financial goals.