How Can You Find Auto Insurance on a Tight Budget?

Owning a car is expensive, and insurance costs have been rising (the average full-coverage policy costs about $195 per month as of 2025). The good news is that there are proven ways to lower your car insurance bill even when money is tight. In this article, we’ve broken down the best strategies, ranging from coverage tweaks to discounts and safe driving habits, to help you get the cheapest auto insurance possible without sacrificing necessary protection. All advice here is geared toward U.S. drivers nationwide, so you can save whether you’re in Chicago or anywhere else in the country. (For personalized help finding affordable coverage, call Insure on the Spot at 773-202-5060.)

What Is the Cheapest Way to Get Auto Insurance?

When money is tight, the cheapest way to insure your car is to minimize coverage to what’s absolutely necessary and structure your policy for savings. This often means carrying only the legally required insurance and adjusting policy terms to lower costs. However, it’s important to balance savings with risk, so you’re not left vulnerable after an accident. Here are the top tactics for getting the lowest possible rate:

Stick to Liability-Only Coverage (Drop Full Coverage)

If you own your car outright or it’s not worth a lot, consider liability-only insurance instead of full coverage. Liability coverage pays for injuries or damage you cause to others, which is the core requirement in all states that mandate insurance. Dropping optional coverages like collision and comprehensive (which pay for damage to your own car) can save you a substantial amount on premiums. For example, if you have an older vehicle, you might decide the car’s value doesn’t justify the extra cost of carrying collision/comprehensive insurance. By removing those coverages, your premium will drop (since the insurer no longer has to cover your car’s damages in an accident).

However, be aware of the trade-off. Without collision or comprehensive, you’ll pay out of pocket to repair or replace your own car if it’s damaged or stolen. This approach works best if your car is inexpensive to fix or replace, or if you could afford to go without it. Many people on tight budgets choose liability-only coverage and set aside a small emergency fund for car repairs. Industry experts caution that while dropping coverage lowers your rate, it “can expose you to more risk” if you have an accident. For instance, if you cause an accident and only carry liability insurance, your policy won’t pay anything to fix your own vehicle – so make sure you’re comfortable with that risk.

Carry Only the State Minimum Insurance Requirements

Every state sets minimum liability insurance requirements that drivers must carry by law (except New Hampshire, which has financial responsibility alternatives). Sticking to these state minimum coverage levels is another way to keep insurance as cheap as possible. A minimum-liability policy will generally include bodily injury liability per person and per accident, and property damage liability up to the state’s required limits. These limits vary widely by state, which affects how cheap your policy can be. For example, Florida’s minimum coverage is only 10/20/10 ($10,000 injury per person, $20,000 per accident, $10,000 property) – one of the lowest requirements in the U.S. – whereas Alaska requires 50/100/25, five times higher for injuries. Most states fall somewhere in between; Illinois, for instance, mandates 25/50/20 as minimum liability coverage (meaning $25k per person, $50k per accident for injuries, and $20k for property damage).

By purchasing only your state’s minimum required limits, you’ll get a bare-bones policy with the lowest premium. This satisfies legal requirements so you avoid penalties for driving uninsured. Many budget-conscious drivers are comfortable with state minimum policies, especially if their car is older or seldom driven.

Note: Minimum coverage will save you money on your monthly bill, but it may not be enough in a serious accident. If you cause a major crash with damages exceeding those low limits, you are personally liable for the rest. Injured parties might even pursue your personal assets if insurance doesn’t fully cover their medical bills or repairs. So while a state-minimum policy is cheapest, it offers the least financial protection. Consider your own financial situation: if you have a house, savings, or other assets, carrying only minimum liability could put those at risk in a worst-case scenario. As Progressive Insurance advises, make sure your liability limits can cover your net worth to avoid exposure. 

To find your state’s requirements, check with your state’s Department of Motor Vehicles (DMV) or insurance department (most have the info on their website). The Insurance Information Institute provides a handy list of each state’s minimum liability limits. Always ensure you meet at least these limits; driving without at least the minimum insurance is illegal in nearly all states and can result in fines or license suspension if you’re caught.

State Minimum Liability Examples: Here are the liability insurance minimums in a few example states (per person / per accident / property damage):

Sticking to these minimums will generally give you the lowest premium available. Just remember the trade-off: low premiums = low coverage. If you decide to carry minimum limits, drive carefully and be prepared for potential out-of-pocket costs above your coverage if an accident occurs.

Raise Your Deductibles to Reduce Premiums

Another reliable way to lower your auto insurance cost is to increase your deductibles on collision and comprehensive coverage. The deductible is the amount you pay out-of-pocket on a claim before insurance pays the rest. By choosing a higher deductible, you assume more of the risk, so the insurer charges you less for coverage. For drivers on a budget, this can be an easy tweak to save money without changing your liability limits or dropping coverage entirely.

Common car insurance deductibles are $250, $500, or $1,000 (and even higher options with some companies). As a rule of thumb, the higher the deductible, the lower your premium will be. For example, raising your deductible from $200 to $500 could cut your collision and comprehensive premium costs by about 15%–30%, and going up to a $1,000 deductible might save you around 40% or more on those coverages. This is a significant reduction for budget-conscious drivers. Essentially, you are agreeing to pay the first $1,000 of repairs yourself if you have an at-fault accident, but in exchange, your insurer charges you much less each month. Over time, if you don’t have claims, the savings stay in your pocket.

Before you opt for a high deductible, make sure you could actually afford to pay it if you needed to. Set aside an emergency fund equivalent to your deductible amount, so that you’re prepared. Progressive Insurance recommends building a “rainy-day fund” before increasing deductibles, to ensure you can comfortably cover that expense if an accident happens. Also, consider your driving risk: if you rarely make claims and have a good driving history, taking a higher deductible is more likely to pay off in savings. On the other hand, if you’ve had accidents or live in an area with high rates of claims (storm damage, theft, etc.), you might end up having to pay that big deductible sooner than later.

How Can You Lower Your Car Insurance Premiums?

Beyond adjusting your coverage, there are several strategies to lower your car insurance premiums while still maintaining the protection you need. These involve smart shopping habits, taking advantage of discounts, and maintaining a good profile as a driver. Here are some of the most effective methods:

Shop Around and Compare Quotes Regularly

Insurance pricing can vary dramatically from one company to another for the exact same driver and car. Comparing quotes from multiple insurers is therefore one of the most powerful ways to save money. Make it a point to shop around periodically—experts suggest doing so at least once a year, especially before your policy renewal. By checking quotes from different companies, you may find a significantly lower rate for the same coverage. In fact, a Consumer Reports analysis found that drivers who shopped for new insurance saved a median of $461 when they switched providers, and the majority saved at least $100 per year. Those are big savings that you can’t afford to miss if you’re on a tight budget.

When comparing quotes, be sure to keep apples-to-apples: select the same coverage types, liability limits, and deductibles for each quote so you can truly see which insurer offers the best price for your scenario. You can use online comparison tools or work with an independent insurance agent who can check rates from multiple companies on your behalf. Also, consider getting quotes from insurers known for catering to high-risk or budget drivers if that fits your profile (for example, some companies specialize in insuring those with past accidents or those needing SR-22 filings). Remember, insurance rates change frequently, and a quote that was cheapest last year might not be the cheapest this year, so continuous comparison is key to keeping your premium low.

Tip: Don’t cancel your current policy until your new one is in place, and avoid any lapse in coverage. Even a short lapse can lead to higher rates later, because insurers view a coverage gap as a risk factor. Plan the switch so your new policy starts as soon as (or before) the old one ends.

Claim All Available Discounts (and Bundle Policies)

Insurance companies offer a wide array of discounts that can cut your premium without reducing coverage. When money is tight, it’s crucial to take advantage of every discount you qualify for – these can add up to substantial savings. Common auto insurance discounts include:

• Safe-driver discount: If you have no recent accidents or tickets (often 3-5 years clean driving), insurers reward you with lower rates. This ties into maintaining a clean driving record, discussed more below.
  
• Multi-policy (bundling) discount: Insuring your car and home (or renters, or another vehicle) with the same company typically gives you a significant discount on both policies. Bundling auto with homeowners insurance, for example, could save you around 5–25% on premiums. It’s a convenient way to lower costs if you need multiple types of insurance.
  
• Multi-car discount: If you insure more than one vehicle on the same auto policy, most insurers offer a discount.
  
• Good student discount: Many insurers lower rates for students (usually under age 25) who maintain a high GPA (e.g., “B” average or better), on the theory that responsible students make safer drivers.
  
• Defensive driving or driver’s education: Completing an approved defensive driving course can earn a discount (this is sometimes mandatory for older drivers to renew licenses, but it can help anyone save money).
  
• Low-mileage discount: If you drive under a certain number of miles per year, let your insurer know. Driving less means lower risk of accidents, and some companies will lower your premium if your annual mileage is below a threshold (e.g., <7,500 miles/year).
  
• Auto-pay or pay-in-full discount: Something as simple as enrolling in automatic payments, going paperless for billing, or paying your 6- or 12-month premium upfront can yield small discounts. For instance, insurers often charge a few dollars more per month if you pay monthly; avoiding those installment fees by paying in full can save around 5–10% in total.
  
• Telematics/usage-based discounts: Many insurers have programs (often an app or device for your car) that monitor your driving habits (speed, braking, time of day, etc.). Safe driving behavior tracked over time can earn you discounts. For example, Progressive’s Snapshot program personalizes your rate based on actual driving and drivers who save with it average $322 off per year.
  

When getting quotes or reviewing your policy, ask about every discount – sometimes companies don’t apply one until you request it or provide proof (e.g., proof of good grades or completion of a defensive driving course). Also, periodically update your insurer if your circumstances change in a way that could add a discount (such as getting married, which can lower rates, or moving to a location with safer parking). These discounts don’t reduce your coverage at all; they’re basically free money for qualifying behaviors or characteristics, so they are a budget driver’s best friend. According to Progressive, the average customer qualifies for about seven different discounts, so there may be more opportunities to save than you realize.

Pro Tip: If you’re really focused on saving, consider bundling your auto insurance with another policy. Many insurers (like State Farm, GEICO, Allstate, etc.) offer multi-line discounts. For example, Liberty Mutual notes that you could save over $950 by bundling auto and home insurance (individual results vary). Even renting? Try getting renters insurance from your auto insurer; renters policies are inexpensive, and the multi-policy discount on your car insurance can sometimes offset most of the renters policy cost – essentially netting you broader coverage for very little extra money.

Maintain a Clean Driving Record (Avoid Accidents & Tickets)

Safe driving is not only good for your health and safety – it’s excellent for your wallet. Insurance premiums are heavily influenced by your driving record. If you haven’t had any accidents, traffic tickets, or DUI/DWI incidents in the past several years, you are likely qualifying for the best rates possible with your insurer. Many companies offer a “safe driver” discount or accident-free discount that grows over time. For example, some insurers might knock, say, 10% off your premium for each year you stay claim-free, up to a maximum discount after 3-5 years. On the flip side, any at-fault accident or serious violation can surcharge your premium significantly (often for 3 years or more).

For those on a tight budget, keeping a clean record is one of the most impactful things you can do to keep insurance affordable. The cost of a speeding ticket or at-fault accident can raise your rate by hundreds of dollars per year when your policy renews (surcharges can range from ~20% increase for a minor speeding ticket to 50% or more for a DUI, depending on state and insurer). These penalties will stick around for multiple years. Thus, obey speed limits, drive defensively, and follow the rules of the road – it directly pays off in lower premiums. If you have past violations, don’t lose hope: as they age and eventually drop off your record, your rates should go down. In the meantime, focus on safe driving going forward.

Insurers also often extend discounts to drivers who take proactive steps to improve their skills. For instance, completing a defensive driving course might not only give you a discount as mentioned above, but it also refreshes safe driving habits that help you avoid future tickets/accidents. Similarly, many states allow a “safe driving” course to remove points from your license after a violation, which can mitigate insurance increases. All of this ties into preserving that clean record for the long term.

Consider Usage-Based or Pay-Per-Mile Insurance

If you’re a low-mileage driver or have very safe driving habits, you might benefit from usage-based insurance programs. These programs (offered by many major insurers) use telematics technology – typically a smartphone app or a plug-in device – to monitor how you drive. They look at factors like miles driven, time of day, smoothness of braking and acceleration, etc. The idea is to personalize your premium to your actual driving risk. If you drive very little or very carefully, you can often get a sizable discount compared to a standard rates.

One form of this is pay-per-mile insurance, where you pay a base rate plus a few cents per mile you drive. This can be extremely cost-effective for people who don’t use their car much (e.g., those who work from home or have a short commute). Another form is the safe driving score programs (like Progressive’s Snapshot, Allstate’s Drivewise, State Farm’s Drive Safe & Save, etc.), which give you a discount if you drive below certain risk thresholds. As noted earlier, Progressive says drivers using Snapshot save an average of $322 a year – a significant chunk for someone on a budget.

Before enrolling, consider whether you’re comfortable with the insurer tracking your driving data. Also, usage-based programs can sometimes increase your rate if they determine you’re a higher-risk driver (for example, if you routinely drive late at night at high speeds, it could backfire). But most programs only offer discounts for good driving, and if you perform poorly you may simply get no discount rather than a surcharge. Check the terms with your insurer.

For low-mileage folks, some companies like Metromile (in select states) specialize in per-mile insurance, and others have low-mileage discounts if you stay under a certain annual mileage. It can be an ideal solution if you want full coverage but only drive, say, 3,000 miles a year – you shouldn’t have to pay the same as someone driving 15,000 miles. Usage-based insurance aligns your premium more closely with your personal usage and behavior, which can be great for saving money as long as you drive safely.

Are There Flexible Payment Options for Budget Shoppers?

When you’re on a tight monthly budget, it may be easier to pay monthly or quarterly rather than paying 6 or 12 months of premium all at once. Almost all major insurance companies allow this, though some might charge a small installment fee for each payment (a few dollars per payment in many cases).

When you set up your policy, ask about the billing options. Typical choices include: paying monthly, quarterly, or semi-annually, and some even allow picking a specific due date that aligns with your paycheck schedule. Insurers often incentivize automatic payments – for example, you might get a discount for enrolling in autopay (and it ensures you don’t miss a payment). Progressive, for instance, lists a discount for setting up autopay and also for paying the full term upfront. If there’s an installment fee for monthly payments, calculate whether you save in interest or fees by finding the money to pay in full. But if it’s not feasible, don’t worry; the fees are usually small, and maintaining coverage is the priority.

Importantly, never let your policy lapse due to non-payment. If you can’t afford an upcoming payment, contact your insurance company immediately. They might be able to adjust your billing date or make other arrangements. Some insurers offer a brief grace period for late payments, but policies will cancel for non-payment if too far overdue. A lapse in insurance not only leaves you uninsured (which is risky and illegal while driving) but can also lead to higher premiums when you try to restart coverage later. It’s better to arrange a smaller payment or a different plan than to have a lapse.

If you find even monthly payments are too high, revisit your coverage choices as discussed above (raising deductibles, dropping extras) to lower the overall premium. You can also look into whether you qualify for any hardship programs. A few states have experimented with low-income insurance programs (for example, California’s Low Cost Auto Insurance program offers state-minimum liability policies at reduced rates for those under certain income levels). Such programs are not available everywhere, but it’s worth researching via your state’s insurance department or DMV if you’re truly struggling.

Ultimately, insurance is not a one-size-fits-all billing situation. Companies want to keep customers, so they generally provide payment flexibility to accommodate tight budgets. Use those options to stay insured continuously, even if it means paying a bit more over time versus all at once. Having some coverage in force is always better (and legally required) compared to letting it drop because of payment issues. And as your financial situation improves, you can switch back to paying in full to save a few extra dollars.

What Happens if You Can’t Afford Car Insurance?

Driving without at least your state’s minimum required coverage is illegal (except in two states with special provisions) and can lead to serious consequences. Nearly all U.S. states mandate insurance because it ensures that drivers can cover the costs of any harm they cause. If you’re caught driving uninsured, you could face fines, license suspension, vehicle impoundment, and future insurance rate hikes. For example, being ticketed for no insurance might cost hundreds of dollars in penalties, and you’d still be required to purchase an insurance policy and file proof (such as an SR-22 certificate) to reinstate your license.

SR-22 Note: An SR-22 is a form filed with the state (usually via your insurance company) to prove you carry insurance after a violation like DUI or driving uninsured. If you ever need an SR-22, it means insurers consider you a high-risk driver, and your premiums will be higher. In that case, it’s even more crucial to shop around for the best deal. Insure on the Spot, for instance, specializes in helping high-risk drivers find affordable SR-22 insurance in Illinois and could assist if you’re in that region.

So, what can you do if you legitimately cannot afford insurance? Here are a few suggestions:

• Don’t drive your car until you have insurance reinstated. If possible, use alternative transportation (carpool, public transit) while you save up for the insurance down payment. This avoids the legal risks of driving uninsured.
  
• Look for alternate coverage options: For example, if you’re temporarily without a job or experiencing hardship, see if a family member can add your car to their policy (multi-car policies are usually cheaper per car than individual policies) – you’d need to also be listed as a driver. Or, if you have an existing policy but can’t pay, ask your insurer about reducing coverage or restructuring the policy instead of canceling. They might shift you to a more basic plan that you can afford.
  
• State assistance programs: As mentioned, a few states offer special low-income auto insurance programs. California’s Low Cost Auto (CLCA) program is one example, providing bare-bones liability coverage to drivers who meet income guidelines at a reduced rate. New Jersey has a similar program (SAIP) for medical-only coverage for certain low-income drivers. These programs are limited but worth checking if you qualify.
  
• Downgrade your car: This is a tough pill, but if your car is expensive to insure (say a sports car or a newer car with high premiums), consider whether selling it and getting a cheaper, older vehicle might lower your insurance costs. Older cars can be insured with liability-only (since their value is low), which, as we discussed, is much cheaper.
  
• Adjust your lifestyle: Look at ways to reallocate budget to afford insurance – for instance, cutting back on other expenses or picking up a short-term side job to cover the insurance bill. Because going without insurance will cost you much more in the long run (one accident could be financially devastating, or a license suspension could hinder your employment).

Finally, don’t be ashamed to ask for help. Insurance agents can sometimes find additional discounts or state-sponsored options if you explain your financial hardship. The team at Insure on the Spot, for example, is accustomed to helping drivers with tight budgets or past issues find coverage solutions that meet legal requirements without costing a fortune. The priority is to get you insured in some fashion so you’re protected.

Need Affordable Coverage? Insure on the Spot is committed to helping drivers find cheap car insurance that still meets their needs. We understand budget constraints and can guide you through options like state-minimum policies, SR-22 filings for high-risk drivers, and all the discounts you qualify for. Our licensed agents can answer your questions and provide a free quote tailored to your situation. Call 773-202-5060 or visit our website for a quick quote. Since 1986, Insure on the Spot has been helping drivers save money without skimping on crucial coverage. Let us help keep your wheels on the road and your wallet happy (as our motto says)!

Frequently Asked Questions

What happens if I can’t afford car insurance?

If you truly cannot afford any car insurance, the safest move is not to drive until you can. Driving without insurance is illegal in almost all states and can lead to fines, license suspension, and other penalties. Explore options like state-sponsored low-income insurance programs (e.g., California’s CLCA program), ask your insurer about hardship payment plans, or see if a family member can temporarily add you to their policy. It’s critical to maintain at least the minimum required coverage before you resume driving – otherwise you risk serious financial and legal consequences if an accident happens.

Is minimum liability insurance enough coverage on a tight budget?

Minimum liability insurance will keep you legal on the road and is the cheapest option, which helps if you’re on a tight budget. However, it’s only “enough” in a small accident scenario. If you cause a serious crash, the minimum coverage limits (which can be as low as 10/20/10 in some states) may not fully pay for the injuries or damages. Anything beyond your limits, you’d have to pay out-of-pocket. So while state-minimum insurance is enough to satisfy the law and very budget-friendly, it might not be enough to protect your assets or finances in a major accident. If you have any appreciable assets, or you want more peace of mind, consider buying higher liability limits when you can afford to, even if it’s just the next level up (e.g., 50/100/50). It’s a tough balance – minimum coverage is certainly better than none and works for many budget drivers, just be aware of its limitations.

Is it cheaper to pay car insurance monthly or annually?

Paying annually (or semi-annually) is usually cheaper overall than paying monthly. This is because most insurers charge small installment fees or don’t give certain discounts when you pay monthly. By paying your six-month or annual premium in full, you avoid those extra fees and often qualify for a pay-in-full discount (commonly around 5-10%). However, if paying all at once is not feasible with your budget, it’s perfectly fine to pay monthly – just know you might spend a bit more in total. For example, your insurer might offer a slight discount for one lump sum or charge an extra $5 per month for installments. Over a year, that could mean ~$30–$60 more paid by choosing monthly. The convenience might be worth it if cash flow is an issue. Some companies (like certain mutual insurers) don’t charge extra for monthly payments, but most do. Always check your bill details.

Does a low credit score affect car insurance rates?

In most states, yes, your credit history can impact your car insurance premium. Insurers use a specific “insurance credit score” in many states as a factor to predict the likelihood of claims. If you have a poor credit score or a limited credit history, insurers may consider you a higher risk and charge higher rates. The difference can be quite significant – drivers with very good credit might pay substantially less than those with poor credit, all else being equal. There are a few states (California, Hawaii, Massachusetts, and Michigan for certain coverage) that ban or restrict the use of credit scores in auto insurance rating, to keep things fair. But nationally, it’s a common practice. For someone on a tight budget, this is important: maintaining good credit (paying bills on time, keeping credit card balances low) can eventually translate into lower insurance costs. If your credit has improved since you last got a quote, shop around again – you might now qualify for a better rate. Conversely, if you’re struggling with credit, focus on insurance companies or programs that de-emphasize credit (some smaller or regional insurers do this). 

Note: Insurers use credit as one factor among many (driving record, location, vehicle, etc.), so it’s not the sole determinant, but it can move the needle on your premium.

How can I save on car insurance without sacrificing coverage?

The best way to save without cutting coverage is to maximize discounts and optimize your policy. Start by shopping around with multiple insurers to find the lowest rate for the full coverage you need – prices vary, so you might discover a much cheaper option for the same coverage. Next, ensure you’re getting all discounts: safe-driver, multi-policy bundling, multi-car, good student, defensive driving, etc. These can reduce your premium without reducing any coverage benefits. You can also raise your deductibles for comprehensive and collision – this keeps the coverage in place but makes it cheaper (just be sure you could pay the higher deductible in a claim). Another tip is to consider telematics/usage-based insurance programs; they don’t remove coverage, but if you drive safely you earn savings. Essentially, focus on efficiency: keep the coverages that protect you (liability, possibly collision/comp if needed) and find the insurer that rewards your profile with the best price. Often, drivers can trim a lot of fat in cost by switching insurers or tweaking deductibles, all while keeping the same levels of protection. And of course, maintain a clean driving record – that way you won’t face surcharges, allowing you to retain full coverage at a lower cost.