Car Insurance Budgeting Guide in 2023

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Car insurance budgeting guide

Owning a car can be one of the most liberating experiences you’ll have in your life. You can drive anywhere you want to with very few limitations. On top of that, you’re no longer reliant on the terrifying public transport system. All that said, car ownership isn’t all road trips and fun. Certain aspects of it can quickly get overwhelming, i.e., gas expenses, maintenance costs, and insurance costs.

Drivers can’t go without car insurance in most of the United States. You need to at least have liability insurance to cover costs for possible accidents or other mishaps on the road. Unfortunately, car insurance isn’t the cheapest commodity around. So, knowing exactly how to budget your car insurance expenses is a must; otherwise, you might end up financially burdened.

If you’ve ever asked yourself, “How much is car insurance in this city,” this car insurance budgeting guide is for you.

Car Insurance Budgeting Guide

Shop Around for the Perfect Car Insurance

One of the first things you want to do when budgeting for car insurance is shop around. Insurance rates differ among providers—so if you don’t like the rates you’re offered at one company, you can always look for others who are more accommodating.

There are three common types of insurance companies:

  • Ones that sell through agents
  • Ones that sell through the phones
  • Ones that sell through applications or other online platforms

To widen your choices, experts recommend getting at least three quotes from each insurance company type. Make sure to get one for different types of insurance coverage. That way, you have more information to work with once you start cross-referencing your findings.

Beware of the allure of cheap car insurance policies. They might seem cost-effective right now, but down the road, they might just put you in a financially tight situation. Only choose a reputable company with a long history of delighted customers to support its claims.

Look for Car Insurance Before Buying a Car

Car insurance prices are largely influenced by the type of car you’re driving. Different cars require different maintenance and repairs. They also have varying risk levels for theft or vandalism. It’s best to match your insurance rates with the budget you have for your car. That way, you can avoid overspending on either one.

Maintain Good Credit

Your credit score plays a huge role in deciding your insurance rates. Insurance companies use it to calculate how much of a risk you are to the company—financially speaking. The better your scores are, the more likely you will get preferable rates. Conversely, the worse your scores are, the more likely you will receive unattractive rates.

A great way to avoid this is to consider increasing your credit score. Not only does this make you look like a more reliable client, but it also helps you build more wealth in the long run—especially if you play your cards right.

Consider paying your credit bills earlier or on time to improve your credit score. Late payments don’t bode well with lenders—the longer it takes to pay these lenders back, the worse they think of you as a client.

There are plenty of other methods to increase your credit score. All it takes is a quick online search using the right keywords, and you’ll find an entire arsenal open for you to use. Set aside time this week to conduct this little experiment.

Raise Your Deductibles

Unlike what most people believe, insurance policies can’t pay for everything. They have limits that often depend on the policyholder’s insurance type and premium. Once that limit is exceeded, the rest of the expenses fall on the client’s lap—you. This expense is often referred to as deductibles.

You can lower these deductibles to lower your out-of-pocket expenses. However, this may also mean increasing your insurance premiums—which isn’t always the cheapest option.

On the other hand, you can increase your deductibles and pay lower monthly or annual premiums. But that, too, will have its downsides.

When deciding whether to increase your deductibles, make sure to weigh the pros and cons that come with the decision. If you think it can save you more to increase your deductibles, do what you believe will be best for your finances.

Ask About Low Mileage Discounts

If you don’t drive your car daily, asking for a low mileage discount might be a great idea to save you more money on your car insurance. Some companies offer this discount to motorists who don’t drive as often as others. This means they’re less likely to get into risky situations, e.g., collisions, crashes, vandalism, etc.

Remember that there’s still a maximum mileage requirement for this discount. The number will vary from company to company. Ask your insurance provider about their requirements so you can adjust your usage and get eligibility.

Reassess Your Coverage

While car insurance companies can help you out of auto-related financial burdens, ultimately, their goal is still to sell as many policies to you as possible. This is why many car owners spend more money on the coverage they don’t need.

To avoid this financial pitfall, you must reassess your current car insurance policy. Make sure you’re not paying for more coverage than you need. Once you’ve reviewed the entire document, contact your insurance provider or agent and ask them to adjust your coverage. This can save you several hundred dollars on your insurance premium.

Consider Bundling Your Insurance 

If your insurance provider offers more than just auto insurance, it might be smart to consider bundling your policies. Some companies also offer house or life insurance on top of auto insurance. Existing clients may be offered certain discounts to offset the expenses of getting a variety of insurance policies from the company.

Not many companies offer this type of discount to clients, so it’s best to do your research and see if your policy provider will be kind enough to accommodate your request.

Take a Defensive Driving Course

Defensive driving courses are often required for traffic violators or drivers recently involved in auto accidents. These courses are meant to refresh a student’s knowledge of the rules and regulations of the road. Upon completing the course, you can use your newly acquired education credits to a) remove points from your driving record, b) reinstate a suspended license, and c) get insurance discounts.

Voluntarily taking a defensive driving course can get you up to three years of discounted insurance premiums. You just have to find the right school to work with. Luckily for you, most states now allow online defensive driving classes. So, you don’t have to travel from home to a facility just to sit in a dingy old classroom.

The Bottom Line

Getting car insurance is possibly the most confusing thing for any first-time car owner. It’s understandable if you feel overwhelmed or lost in the process. Luckily, the internet is crawling with car insurance reviews and guides like this one to help you make the best decision for your car. Take time to thoroughly read the tips mentioned above and try to apply them to your current situation. Good luck!

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Jason Butler is the owner of My Money Chronicles, a website where he discusses personal finance, side hustles, travel, and more. Jason is from Atlanta, Georgia. He graduated from Savannah State University with his BA in Marketing. Jason has been featured in Forbes, Discover, and Investopedia.