How Does Being Self-Employed Affect Car Insurance?

Your employment status can impact your car insurance in ways big and small.

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Car insurance for the self-employed

Occupation is used as a rating factor by car insurance companies when setting prices. Some car insurance companies award drivers in certain industries small discounts because of the correlation between the occupation and safe driving. Self-employed individuals and independent contractors typically do not fall into this category. Although you might not pay more for car insurance because you’re self-employed, it's always worth finding ways to save. Let’s explore how to save on car insurance as a self-employed driver.

  1. How does your job affect what you pay for car insurance?
  2. Can you report car insurance as a tax deduction if you're self-employed?
  3. How to save on car insurance

 

How does being self-employed affect car insurance?

This depends on your line of work and how your insurance company views that profession. See below average auto insurance premiums by occupation. If you’re a self-employed lawyer, you might see some insurance savings. However, if your insurance company conflates self-employed with unemployed for whatever reason, you see zero savings.

 

Occupation

Average Annual Premium

Savings vs. Unemployed

Unemployed

$1,417

--

Other

$1,416

$1

Proprietor

$1,416

$1

Civil Servant

$1,410

$6

Manager

$1,402

$14

Law Enforcement

$1,388

$28

Teacher

$1,388

$29

Firefighter

$1,385

$31

Doctor

$1,382

$34

Scientist

$1,382

$35

Lawyer

$1,381

$36

Engineer

$1,381

$36

Military

$1,374

$43



Can you deduct your car insurance on your taxes if you’re self-employed?

If you use your vehicle for business purposes, you can deduct all necessary and ordinary costs relating to car insurance on your tax return. However, a business-use policy is non-standard. This doesn’t mean you drive your vehicle to and from wherever you are working. This means you use your vehicle your business and associated duties related to your business.

Depending on what you do for a living, you can either get a commercial policy or a personal business use policy. Commercial policies are different and are not sold by all major insurers. Personal business use policies are more common, although slightly more expensive. Below are average car insurance premiums by vehicle use.

 

Vehicle Use

Car Insurance Premium

Business

$1,568

Pleasure

$1,540

Work

$1,427

Farm

$1,335


You can find more information relating to car insurance and taxes, including how to file your deductions, here.

 

How to save on car insurance if you’re self-employed

If you’re a freelancer, your paychecks could be inconsistent. This can make it tricky to stick to a monthly billing plan — especially if your premiums are high. Let’s explore some ways to lower your car insurance premium.

 

Explore alternative billing cycles

Depending on your state and your car insurance company, you might have some flexibility in setting a payment plan. Certain insurance providers offer multiple billing plans, including 1-pay, 2-pay, 4-pay, and monthly.

  • 1-pay:  Otherwise known as paid in full, you pay for your entire six-month premium up front. This will usually earn you a discount.
  • 2-pay:  Similar to how it sounds. You pay half your premium at the start of your policy, and the next halfway through.
  • 4-pay:  Your six-month premium is divided into four installments.
  • Monthly Plan:  Standard billing system, you pay your car insurance premium once a month.

Again, the availability of the 2- and 4-pay plans depend on a number of factors. Your current provider might have a non-standard, non-monthly schedule that could work for you. Speak to your insurance agent about alternative billing cycle availability.

 

Don’t pay for coverage you don’t need

If your vehicle is worth less than $4,000, consider dropping collision and comprehensive coverages. These coverages are not required by any state’s insurance laws and tend to be expensive. If you’re unsure of the value of your vehicle, use Kelley Blue Book to determine the value.

 

Use your collision coverage sparingly

Unless you have accident forgiveness built into your insurance policy, all insurance companies will charge you an accident surcharge for up to three to five years after you file a claim. This could increase your premium by an average of $617 per year. See below how much this could cost over three years.

Year After Accident

Premium Increase

0

$0

1st Year

+$617

Second Year

+$1,234

3rd Year

+$1,851

If you’re unsure of whether or not to file a claim, follow this workflow:

  1. Get an estimate for the value of the repairs, out of pocket.
  2. Use our State of Insurance Analysis to see by how much an at-fault claim would raise rates in your state.
  3. Compare the value of the rate increase over three to five years (plus your deductible) to the out-of-pocket expenses determined in step 1. If it is cheaper to file a claim, do that.

 

Double check for discounts

Earning a multi-policy discount won’t save you a tremendous amount of money but it can be useful. Below are some common discounts you might qualify for.

  1. Good/safe driver
  2. Multiple drivers
  3. Multi-vehicle
  4. Multi-policy
  5. Bank account autopay
  6. Paid in full
  7. Good student
  8. Telematics
  9. eSign
  10. Group participation/affinity membership discount
  11. Homeowner discount
  12. Green vehicle discount

Shop around

Regardless of your employment status, the very best way to ensure you’re getting the best rate is to compare rates from as many insurance providers as possible. This allows you to compare and select the company that gives you the best coverage for the best price. Enter your ZIP code below to get started.



Find a policy today!

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