What is Low Income Car Insurance?
If you are a driver with a currently low income that can't access state subsidized auto insurance, there are still ways to find cheap auto insurance. Auto insurance can be an expensive necessity for all families not just low-income households. But it is state law that if you are driving a vehicle to carry the state minimum liability limits. We did find three states that currently offer special auto insurance for people who can't afford an insurance policy on the open market and they are California, Hawaii, and New Jersey.
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But if you do not live in one of the 3 states mentioned above there are still things you can do to save money on your car insurance. The biggest thing is to shop around and get as many quotes as possible and the other being keeping a clear driving record. Different auto insurance companies can offer drastically different prices for the same risk, so if you don’t get multiple quotes, you could be missing out. Car Insurance companies adjust their rates all the time so if you are not checking around a lot you could miss this savings opportunity.
Some auto insurance companies are starting to offer pay per mile insurance policies that can be good for low-income individuals who do not drive very much.
Most auto insurance carriers offer discounts to encourage safer behind the wheel. The less accidents you have the more money they make. Every insurance carrier offers different discounts but many are going to be very similar. It is important to ask you insurance company about all the discounts you may qualify for. Some companies may not offer all discounts up front so you will need to ask. In addition to these tips, we found a few more things low-income individuals can do to find cheap car insurance.
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Other ways for low income drivers to find cheap car insurance
- Set your monthly payments on auto pay
- Enroll in paperless billing
- Take a defensive driving course
- Keep continuous insurance for at least six and shop around at renewal time
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Try to avoid letting your policy lapse
When you are struggling to meet ends meet it is tempting to let your auto insurance policy lapse. This could be a bad idea and we do not recommend cancelling your auto insurance policy to save money if you are still driving it. The risk of doing so far outweighs the savings of the premiums. The penalties of driving without insurance are severe. When caught driving without insurance your license can be suspended and you could hit with large fines, fines that are far greater than the cost of insurance. Having your license suspended will make our auto insurance rates even higher when you start your insurance back up. Some companies won't accept you if your license is suspended which can be costly because it limits your pool of companies to choose from.
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Also, if you are involved in an accident that is your fault you could be held personally liable for the damages which can get very costly especially if you are sued. If the other driver is at fault and you don’t have active insurance some states have a law where you cannot even collect for the damages done to your vehicle.
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Even if you are putting your car in storage of not driving for a short period of time, we still recommend not cancelling your auto insurance policy. It will cost you more when you start back up. Auto Insurance companies do not like lapses in coverage. Drivers who keep their policies active are among the most rewarded with discounts. It is not against the law to cancel your insurance if you are not driving just not recommended due to the increase in price you could receive when you want to start it back up again.
Reducing your coverage limits Instead of cancelling the policy altogether you may just consider lowering your extra policy coverages or raising the deductibles on your policy if you have full coverage. You may consider removing comprehensive and collision coverage to save money also. This is also called full coverage which is the most expensive type of auto insurance because it covers the damage done to your vehicle. Be careful though to not lower your coverages past what you can afford to pay just in case you are involved in an accident.
The cheapest policy you can purchase is state minimum liability only policy with no extra coverages. Then once the vehicle is back in use and you are driving again you can get covered appropriately. We recommend talking to an insurance agent before you do any coverage changes.
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Sell the cars you don’t drive anymore
We see people all the time who own cars and pay insurance on them when they really don’t need them. If you live alone there may not be a need to own 3 cars and pay insurance on them. The more vehicles you own the more you will pay for insurance. Even though you will get a multi car discount this discount does not override the fact that the more cars the higher the insurance.
Own a vehicle that is cheap to insure
If you are running low on money, it may be best to buy an older car and carry liability only coverage, which is the cheapest policy sold. Generally, the older the vehicle the lower it costs to insure especially for full coverage. If you are looking to buy a new car, be sure and call your insurance agent to find out how much it will cost to insure before you purchase it. Vehicles that do not require full coverage insurance may be a good option to start out with.
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Cheapest auto insurance companies for low income drivers
Auto insurance companies do not use income level as a factor in their rating system so you will not pay any more or less due to your income. However, auto insurance companies do use some factors that tend to correlate with income. The cheapest auto insurance policies for low-income drivers are the ones who sell the state minimum limits. These requirements change per state as do the cheapest companies. It is important to remember that state minimum policies do not include comprehensive or collision coverage so you would be responsible for any damage done to your car. But even if your income is low if your vehicle is new then you should consider still carrying full coverage insurance even though the cost is more. What type of vehicle you will have a huge impact on how much you will pay. High performance or sports cars will cost more to insure than a van for instance.
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Low-income drivers sometimes tend to have lapses in coverage and this can lead to higher auto insurance rates. Auto insurance companies consider drivers with lapses in coverage more of a risk to have a claim.
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These are some of the core factors that insurance companies use to set their rates:
- Driving record
- Claims history
- Insurance history
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These are just a few of the rating factors use, there are honestly too many to list and some can be very complicated. If two drivers have very different income levels and all the other information are identical, they should pay about the same for car insurance. But auto insurance prices vary a lot by state.
Population size of your city and state you live in is a huge factor in how much you pay on your car insurance.
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For example, if you live in Houston, Texas you will pay a lot more for car insurance than someone living in Bells, Texas. Just due to the mass population difference in the 2 cities. Cities with a large population will have many more claims turned in due to a large amount of uninsured motorist claims and traffic accidents.
What kind of auto insurance coverage do I need if I have low income?
The state minimum liability limits in which your state requires is the amount of coverage that would be the cheapest option. Depending on which state you are in this coverage can be very low and may not cover you properly. The next step up on liability limits would be the 50/100/50. This seems to be a good sweet spot to properly cover you and keep monthly insurance costs reasonable. If you have a loan on your car the finance company will require you to carry comprehensive and collision coverage otherwise known as “full coverage insurance”. Full coverage insurance usually costs about twice as much as state minimum liability coverage. But it does protect your car in the event of an accident. The cheapest full coverage policy you can get would be the state minimum liability limits plus a comprehensive and collision deductible of $1000, which is the highest deductible most auto insurance companies offer.
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What are the best low income auto insurance companies?
Since income level is not a rating factor that auto insurance companies use there is no specific company that we can say is the best. In essence you would call auto insurance companies that are the best for your situation. For instance, if you are in the military then USAA and Geico are great options for you. If you have bad credit and bad driving record then nonstandard auto insurance companies are going to be the best for you. So, it all just depends on your situation, just be sure to get as many quotes as possible. This is one of the best ways to find the cheapest insurance policy. Also read reviews on the insurance company you choose to make sure it’s a quality company. Finding cheap car insurance is important but
so is finding a company who has great customer service and claims. If you have ever been involved in a claim you will know what I'm talking about.
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