Risks and trade-offs of cheap car insurance
Cost is a priority for many car insurance buyers. In a survey of WSJ Buy Side readers, 89% said rates were the most important factor when shopping for car insurance.
But low car insurance quotes shouldn’t be the only goal. Downsides to buying the cheapest coverage can include:
- Failing to meet car-loan or lease requirements. Car-loan providers and leases require comprehensive and collision insurance coverages. If you drop coverage to get a cheaper policy, you risk not meeting the lender’s requirements.
- Having inadequate liability coverage. You want enough liability insurance to protect your assets if you’re sued over a car accident.
- Paying higher out-of-pocket expenses. The higher your deductible is, the cheaper your premiums will be, but the less you’ll receive in a claim payout. That means you’ll be stuck footing more of the bill in potential collision and comprehensive insurance claims.
- Being underinsured. If you purchase only your state’s required coverage, you could be left with significant out-of-pockets costs after an expensive accident.
- Not choosing the best insurer. You don’t want to choose an insurer with a poor track record for customer service just because it is the cheapest.
Latest developments in car insurance costs
Car insurance rates have stabilized nationally, though there are some states still seeing large rate hikes. A report from credit-ratings agency AM Best found that the average approved rate increase for private-passenger car insurance was 3.7% in 2025, which was well below the 9.7% average the previous year.
The lower increase was spurred by improved loss ratios for car insurers. A loss ratio is the percentage of premiums that an insurer pays out in claims and settlements. A lower loss ratio can mean better efficiency and underwriting profitability and could lead to lower premiums if the insurer passes savings onto customers.
Of note, Allstate, The Hartford, Progressive and Travelers all reported lower loss ratios as of the second quarter of 2026, which could mean they’ll pass along savings to policyholders.
But it’s not all good for drivers. Car insurance rates in California, Nevada, New Jersey and New York continued to rise at higher levels. Rising auto-part costs and tariffs are leading to higher costs to repair vehicles, which are often more complex to repair than vehicles from a decade ago.
Motor-vehicle maintenance and repair costs were up 6.6% in July compared to a year ago, according to the Bureau of Labor Statistics’ Consumer Price Index. The average price of vehicle repairs has grown by over 40% since 2020, which is a higher level than inflation.
Higher insurance rates and affordability issues have led governors in New York and Illinois to take action, with both recently announcing better car insurance rate-review processes by the states’ regulatory bodies.
Sourced from: Factiva
How to get cheap car insurance without settling for the bare minimum
There are several ways to save money on car insurance without settling for inadequate coverage.
