How To Choose the Right Cheap Car Insurance for Your Budget

When you’re building a monthly budget, it can be frustrating to see how much of your money goes to unavoidable expenses like auto insurance. Smart shopping can help you find car insurance that fits your budget, giving you a level of coverage you’re comfortable with while freeing up your finances in other areas.

How to choose the right car insurance for your budget

The right car insurance for your budget might be the cheapest insurance you can find, but that’s not necessarily the case. When weighing insurance carriers, you may want to consider other factors — customer service, claims handling, convenience features and your own coverage needs — to help you settle on budget auto insurance that balances benefits and price.

1. Analyze your current budget

Start by taking stock of what you’re paying for car insurance now — if you have an active policy — and how it fits into your overall monthly expenses. For many Americans, insurance premiums account for around 12 percent of their monthly budget. According to the 2025 True Cost of Auto Insurance report, Americans spend an average of 3.39 percent of their median household income on auto insurance alone. If you’re paying more than that, or if you just want to free up room elsewhere in your budget, you may want to look for savings opportunities.

You may also be in a good position to adjust your car insurance budget if you’ve recently made certain life changes, such as:

• Buying a new car
• Moving to a state, city or neighborhood
• Adding a driver to your policy
• Improving your credit score
• Getting married

Any of these life events has the potential to change your insurance profile, which could mean you’re eligible for new discounts or lower rates. In some cases, a change to your profile could also mean that you have higher coverage needs or face steeper rates.

2. Understand your personal rating factors

Insurance companies set the price of your car insurance based on a wide range of personal factors run through proprietary underwriting algorithms. These factors include where you live, how long you’ve been driving, the vehicle you’re insuring, how much you drive and whether you have any recent accidents, tickets or claims. Depending on where you live, insurers may also look at your gender, credit history and age.

Understanding the risk factors that can increase your insurance costs — such as a driving history of less than three years or a vehicle associated with high rates of theft — can help you prepare to compare quotes from multiple carriers. Because each insurance company puts a different weight on each risk factor, you’ll likely find that while some companies return high quotes, you’re able to find more affordable rates from other carriers that view your profile more favorably.

3. Compare quotes based on coverage options

When comparing quotes, don’t just look at the quoted price — take time to review your coverage options from each insurer. While standard coverage like liability, comprehensive and collision isn’t likely to differ significantly between carriers, add-on coverage options can vary and could help to edge one company out in front of the pack.

If possible, it’s usually helpful to request quotes for the same coverage limits, deductibles and endorsements. If you lease or finance your car, you will probably need to purchase a full coverage policy, which typically includes collision, comprehensive and liability. If you own your vehicle, you may have the option to purchase a cheaper minimum coverage policy that includes only the minimum coverage requirements for your state, but it will not offer as much financial protection. If you’re not sure how much car insurance to shop for, you may want to speak with an independent agent or review your current limits.

But once you’ve met your basic coverage needs — the ones essentially any licensed auto insurer can cover — you may find yourself drawn to optional add-ons. Adding insurance endorsements may allow you to tailor your policy to meet your unique needs, but they usually come at an additional cost. Insurance endorsements vary by company, but some common options include:

• Gap insurance: This covers the “gap” between what you own on your car loan or lease and the value of your vehicle in the event it is totaled or stolen and nonrecoverable.
• Custom equipment coverage: If you added custom equipment to your vehicle like lights, spoilers or wheels, this endorsement offers coverage for those additions.
• New car replacement coverage: If you have a fairly new vehicle that is deemed a total loss following a covered event, this coverage would pay to replace your car with a brand-new model of the same vehicle.
• Rideshare coverage: If you drive for a rideshare service, this coverage adds extra financial protection when transporting passengers for commercial purposes.

4. Understand which discounts may apply to you

When choosing car insurance on a tight budget, you may want to pay close attention to the discounts offered by each company. Many car insurance companies offer discounts to help drivers get a better rate, but the discounts available depend on the 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, may help you get a cheaper premium with some carriers.
• 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.
• Good student: Drivers who get good grades in high school or college might qualify for a student car insurance discount.
• Telematics: Many carriers offer telematics programs, which monitor driving habits for both safe and risky behaviors behind the wheel. Safe drivers can often save on their premiums, but some companies may raise your rates if the program uncovers risky habits.
• Affiliation: Some insurance companies offer affiliation discounts for students or professionals. Examples of potential affiliations include professional organizations, alumni groups, businesses and military service.
• Paid-in-full: If you can afford to pay your annual or six-month premium up front and in full, you might save on your rate with certain carriers.

If you qualify for multiple discounts, most insurance companies allow them to be stacked together, which lets you maximize savings if you qualify for more than one. You can ask about the discounts that are available so you know what you may qualify for when choosing a company. Applying discounts may help lower the cost of car insurance so you can get the policy you need without compromising your coverage.

5. Research trusted third-party ratings

Once you’ve found some carriers that could offer you the coverage you’re looking for at an affordable rate, you may want to look at third-party ratings for the providers 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 may better understand each company’s overall customer satisfaction and financial stability. These metrics may also give you an insight into digital tools offered by each carrier.

Frequently asked questions

• Does cheap car insurance offer worse coverage?
  

  Buying cheap car insurance doesn’t necessarily mean getting worse coverage. In fact, all car insurance companies offer the same basic types of coverage, though optional endorsements may vary between insurers. However, two companies with the same coverage offerings might respond differently when it comes to honoring that coverage, so it’s a good idea to look into an insurer’s history of handling claims and dealing with customer complaints. In some situations, opting for a cheaper rate could mean working with a company that’s known for less efficient claim payouts, but that’s not always the case.

• What is the cheapest car insurance company?
  

  Since each driver’s rates are calculated individually, there is no cheapest car insurance company for everyone. To find the cheapest car insurance company for you, it may be helpful to get several quotes from different companies to compare the options. This may allow you to see how each company’s rates and discount opportunities differ. Keep in mind that it’s important to provide the same coverage selections and policy limits when obtaining quotes from multiple companies for an accurate rate comparison.

• How can I lower my cost of car insurance?
  

  If you are looking for car insurance on a budget, there are some things you may be able to do to lower your cost of car insurance. Shopping around and comparing quotes with different companies may help you find the best price on the coverage you need. Additionally, shopping around before your policy renews may help you see if you’re still getting the best rate. This may be especially important if you’ve recently experienced a big life change, like insuring a teen driver or buying a new car. Lastly, maintaining a clean driving record and being aware of how other rating factors, like credit history, may impact your premium in your state could help you maintain low rates over time.

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

  Switching car insurance companies is one of the best ways to potentially get a better rate. In many cases, insurers raise rates a little each year. However, because rates are set based on each insurer’s unique underwriting evaluations, it’s possible to find other insurers with more competitive rates for your personal factors. Before automatically re-signing your current auto policy at renewal time, take some time to shop around, compare quotes and see if any insurers offer more affordable coverage or have more applicable discounts.

• Will a cheaper car have cheaper insurance?
  

  In general, yes — cheaper cars tend to come with cheaper insurance costs, since the amount needed to repair or replace the vehicle is smaller. However, insurers look beyond a car’s cash value to consider other factors, such as safety ratings and loss frequency, when setting premiums. Take the Mitsubishi Mirage: although this mini hatchback is one of the cheapest cars on the market at a starting MSRP of just $16,695 for 2024 models, its average March 2025 full coverage insurance premium is 7 percent higher than the national average for passenger vehicles. Shaky safety ratings and a collision loss rate substantially worse than average could contribute to the Mirage’s higher premiums relative to its sticker price.

• Is it worth shopping around for car insurance?
  

  Requesting and comparing car insurance quotes is one of the best ways to find cheap car insurance. Policy premiums can vary even when requesting the same coverage types and amounts. This is because insurers weigh personal factors differently, even though they might be looking at the same information. By requesting quotes from several carriers, you can feel confident that you’re getting the best price when you purchase your policy.