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I Can’t Afford My Car Insurance, What Do I Do Now?

In these tough economic times even the smallest hiccup in your finances can cause some big ripple effects. An unexpected bill or repair can put your next rent check or car insurance payment into jeopardy. If mounting bills and a declining income have you screaming, “I can’t afford my car insurance”, you have come to the right place.  Here are a few strategies for making your car insurance more affordable:

Car Insurance is Necessary

The one thing you want to avoid is a lapse in insurance. Carrying the proper liability coverage is required by law in every state except New Hampshire and driving without insurance can have very expensive consequences. While penalties vary by state, fines, suspension of your license and impounding of your car are common if you are pulled over for driving without insurance. If you have the misfortune of causing a serious accident without liability coverage, all of your personal assets could be at risk as victims often sue for damages.

Lapses Can be Expensive

Letting your insurance lapse due to non-payment can be expensive. The grace period can be quite short, in most cases you will have roughly 10 days to pay your premium. Once your policy lapses you will have to reapply for car insurance and in almost all cases your rates will be higher. Drivers who let their policies lapse paid 8.8 percent more for car insurance than those who had continuous coverage. Insurers consider non-payers a bigger risk and charge accordingly.

Preventing a Lapse

While you may find your car insurance payment a challenge, letting your insurance lapse can be a much bigger expense. Fortunately there are a number of things you can do to lower your payment:

  • Shop Around – This is the number one way to lower your car insurance costs. Insurers rate risk differently so there can be dramatic differences in rates. Request rate quotes online and work with local agents to find the best coverage. While shopping around can be a hassle it may just bring your premium back into the affordable range.
  • Drop Coverages – If your car is getting older and you own it outright it might make sense to drop comprehensive and collision. Dropping unnecessary coverage can lower your rates substantially but remember you will be on the hook for repair costs should you be in an accident.

Unfortunately, if are leasing or financing the vehicle this strategy is not an option. A lien holder will require you to carry full coverage and if you try to drop it the insurer has to notify the lien holder by law. The lien holder may repossess the vehicle or put forced placed insurance on the vehicle and add it to your car payment. Forced placed insurance is expensive and only covers the vehicle leaving you exposed to liability issues.

  • Raise Deductibles – While this strategy is not going to cut your premium in half, every little bit helps when it comes to making car insurance more affordable. If possible, double your deductibles to save as much as possible. Be sure you have enough in savings to cover the deductible in the event you are in an accident.
  • Switch Cars – While this may seem extreme and should be used as a last resort this is often the best way to dramatically cut your insurance costs. If you are financing or leasing a newer car that requires full coverage, trading it in for a used vehicle that you can afford outright can result in huge savings.

Car insurance is necessary and letting it lapse can be expensive so looking for ways to lower your costs and make your premiums affordable is a smart move.