On a tight budget? We've got you covered.
Car insurance safeguards your property from theft, accidents and mechanical breakdowns. But safety has its price, and affordable auto insurance for low-income families and individuals isn't always easy to find. Our data shows people who earn between $10,000 and $19,000 per year pay nearly as much as those who earn more than $200,000 per year. Based on the necessity and expense of car insurance, it's not hard to understand why people are looking for car insurance they can afford on a low income. This is where it gets tricky.
Policies built specifically for low-income families are a bit of a gray area for insurance companies because your income isn’t technically a factor for your rate. Insurers use your credit score, education level, homeownership status, insurance history and ZIP code (among other factors) to determine your insurance rate — each of which may be correlated with your income level.
If you’re on a tight budget, finding cheap car insurance is pivotal. While we will discuss some cost-cutting solutions, one of the best ways to save on car insurance is simply to shop around. Companies look at your driving profile and their own loss/revenue ratio in order to profile a premium. Meaning, your rate with one company is uniform. Below are some average rates based on an average profile (outlined here). As you can see, rates vary substantially depending on which carrier you choose. If you’re interested in seeing multiple car insurance quotes, enter your ZIP code below to get started.
Let’s take a look at some other ways to find affordable car insurance.
Insurance companies can’t legally use your income to determine your rate, but they may use other metrics that are often — but not always — correlated to your income level.
Car insurance data suggests that people with higher incomes file fewer claims, but that could be because they simply are able to pay for damages out of pocket rather than filing a claim. Because a lot of these mentioned topics are not always in your control, let’s look at some ways you can still save on car insurance.
You should really only use your car insurance if the value of damage exceeds your reasonable ability to pay for it. Unless you have some sort of accident forgiveness in your car insurance policy, your company will raise your rate for three to five years after an incident. See below how much this would impact your rate.
|At-Fault Accident Surcharge||Annual Premium|
|2nd Year after Charge||$2,703|
|3rd Year after Charge||$3,320|
Over the course of three years, this claim costs $1,850 in surcharges! With a $500 deductible, your total amount paid for an at-fault accident is $2,350. If you have an accident and the out-of-pocket costs are less than $2,350, it makes more financial sense to pay for the damages yourself. Below is a helpful guideline to do so.
Usage-based car insurance policies are designed to create your premium based on how you drive rather than who you are. In theory, if you're a safe driver, you can save. Below are some estimates from popular insurance companies. If you're interested in learning more, see our guide here.
Average of $130
Average of 10-25%
State Farm Drive Safe & Save
Up to 15%
Up to 40%
Liberty Mutual RightTrack
Average of 5-30%
If your vehicle is worth less than $4,000, you should consider dropping comprehensive and collision from your insurance policy. These coverages are designed to protect the physical integrity of your vehicle. But if it isn’t worth much to begin with, you might be paying for coverage you do not need.
If you do decide to drop comprehensive and collision, consider if underinsured or uninsured motorist property damage is right for you. This will protect your vehicle if it’s damaged by another driver with any insurance or not enough to repair or replace it. Bear in mind, you still have to keep your state’s liability coverage by law.
Although some of the following discounts are automatically added, you will still want to comb through your insurance policy to ensure you’re getting every last discount.
This discount refers to having two types of insurance policies under one insurance company. Common policies are home/auto or renters/auto. The discounts affect both your policies, typically.
If you’ve taken a defensive driving course, your insurance company may reward you with a discount on your premium. To see what the big companies will offer you for your good driving record, consult our guide.
If your vehicle comes with an anti-theft device or services like LoJack, your insurance company usually provides a discount.
|Anti-Theft Device||6-Month Premium||% Difference|
|Active Disabling Device||$732.00||-0.41%|
|Passive Disabling Device||$730.00||-0.66%|
Good driver discount
This discount is typically added automatically to your policy and tends to be pretty beneficial. Just like its name implies, this discount refers to having a safe driving record.
Like a multi-policy discount, a multi-car discount refers to having more than one vehicle with a single insurance company.
Preferred payment discount
This method refers to the manner you choose to pay your insurance premiums. While it varies by company, you can usually receive a discount if you pay your premium upfront, pay through your bank account, or opt for paperless billing.
|Electronic Funds Transfer||6-Month Premium||% Savings|
If you pay your insurer your premium ahead of its policy inception date, a lot of companies will give you a discount on your premium.
|Advanced Purchases||Avg 6-month premium||% savings|
Statistically, some occupations like teachers, physicians, or police officers are less likely to file a claim. Additionally, many companies like GEICO and Nationwide offer discounts to certain groups or organizations. Because of this, some insurers return the savings back to you.
For more information, see our guide to insurance affinity discounts.
Good student discount
Most companies will require the student on your policy to have a GPA above 3.0 in order to receive this discount. You can provide the insurance companies with a transcript or report card every policy period as proof.
For more information, see our guide to student insurance discounts.
It might be a fairly obvious suggestion, but if you're already struggling to pay for car insurance you really need to take care while driving. A poor driving record is a major red flag to any insurance company. Depending on your violation type, your car insurance rates can be surcharged for 3 to 10 years! What's more, the eligibility requirements for all good driving-related discounts is a spotless record. All the more reason to drive safely. Below are some national averages for citations.
|Driving with expired registration||$815||$80.43|
|Cell Phone Violation||$879||$144.03|
|Texting while Driving||$880||$145.01|
|Speeding in School Zone||$889||$154.19|
|Failure to yield||$900||$164.86|
|Operating a vehicle without permission||$976||$240.91|
|Driving with a suspended license||$1,194||$458.86|
|Refusal to submit to a chemical test||$1,279||$544.31|
|Leaving the scene of an accident-hit and run||$1,339||$604.44|
There are a few things that insurance companies use when developing your rate that are indirectly tied to your income:
While some states consider the use of a credit score to determine your insurance rate discriminatory, it’s still a pretty common practice. This is because of data from The Federal Trade Commission shows that drivers with low credit scores are more likely to file a claim than drivers with high credit scores.
Moreover, when they do file a claim it tends to be more expensive. As you can see with the data below, drivers with poor credit pay $710 more per six-month policy than drivers with excellent credit. Per month, that’s a $118 difference!
Raising your credit score can save you around 17% on your auto insurance. For more information on car insurance with bad credit, including car insurance company rates, see our full guide.
Statistically speaking, the more education you have received, the more likely your insurance rate is going to decrease. Bear in mind, the difference is quite small — the six-month premium difference between a driver without a high-school degree vs. a PhD is $20.
This is a major rating factor for two reasons. Firstly, car insurance companies see drivers who are licensed but have no insurance history as a major risk. Second, car insurance companies see a correlation between low liability limits and filing claims. As you can see below, the difference between no insurance history and five years of high-level coverage is $204 annually.
Learn more about finding car insurance with no insurance history.
Homeowners, regardless of whether they bundle home insurance with their car insurance, typically pay less for car insurance. Insurance companies see homeowners as more financially stable and historical data shows they file fewer claims than renters. If you're a low-income individual or family, owning a home might not be within your budget. As such, you might be paying slightly more for car insurance because of it.
Your insurance rate depends on your ZIP code. Insurers use a variety of factors such as the number of claims in an area, road conditions, and population size to help determine rates in your zip code. Because your insurance company assumes a portion of financial responsibility, living in an area with a high rate of car theft or property damage claims can be seen as a risky investment to an insurance company.
Because household income isn't directly used to determine monthly rates, most companies don't create special programs for low-income families. But there are state-operated programs and companies that are specifically designed to help.
California has a program called California’s Low-Cost Automobile Insurance Program, or CLCA, and is designed to provide low-cost insurance rates for eligible drivers.
If you meet the above qualifications and decide to opt to participate in CLCA, your insurance limits for bodily injury liability and property damage liability would actually be lower than the state limits. As participants in this program are exempt from state requirements, your limits would be $10,000 for bodily injury or death per person, $20,000 total for bodily injury or death, and $3,000 total for property damage. The amount of the premium ranges based on your insurance history, your county, and your age.
New Jersey’s plan, Special Automobile Insurance Policy (SAIP), provides only the medical coverage portion of your auto insurance after a car accident. Eligibility is dependent upon you already being qualified for Federal Medicaid with Hospitalization, which an insurance agent can determine from your Medicaid ID card.
SAIP costs $365 per year. This coverage is also contingent upon yearly renewal of your Medicaid benefits. For example, if your Medicaid benefits were to lapse mid-year, your SAIP benefits would continue until the next renewal.
This coverage pays for emergency medical treatment immediately following an accident, including the treatment of serious brain and spinal injuries up at $250,000. In the event of death, a $10,000 benefit is available.
As stated, this policy is for medical coverage only—so things like comprehensive or collision coverage aren't provided.
Hawaii provides additional coverage for some of its residents through the state’s Aid to Aged, Blind, and Disabled program (AABD). This program, which provides free auto insurance for those who qualify, has a few requirements:
Because this is a government program, you would need to speak with the Hawaiian Department of Human Services in order to receive any benefits from AABD.
CURE, or Citizens United Reciprocal Exchange, advertises themselves as an insurance provider in New Jersey and Pennsylvania that only uses your driving record as a factor for your rate. It works pretty similarly to other insurance providers in terms of coverage options, discounts, and payment plans.
The Maryland Automobile Insurance Fund is a government-created program in the state of Maryland specifically designed to provide liability insurance for residents who are unable to receive auto insurance on the open market. Independent from the actual state government, they cater to people who have been denied coverage because of poor or no credit, lapses in insurance, or a poor driving record.
Usage-based insurance programs such as Root, Metromile, and others mostly rely on your driving history and habits to determine your premium. While traditional methods are utilized in most of these programs (except Root), how you drive is the biggest rating factor.
Insurance companies can't use your income to determine your rate so we cannot definitively say the two are related. Still, looking at the use of your credit score, education, homeownership status, ZIP code, and insurance history, it is easy to see the two have an inverse relationship. Looking for discounts and shopping for car insurance every six months are great ways to start saving on insurance when you can't change the previously listed variables. When those fail, consider the assistance of a government program.
Our rate-gathering methodology is based on public record fillings. Each year, every insurance company must submit its annual rate filings to their state's Department of Insurance. From their filings, we're able to estimate what future premiums will be. We collect and analyze all zip codes across the US — including Washington D.C. — and use an average profile to give standard rates. Our driver is a 30-year-old single male driving a 2014 Honda Accord. To find car insurance rates for the specific low-income profiles mentioned above, we altered certain aspects of our base profile — credit level, homeowner status, education, driving record, and more.