What is low-income car insurance?

Car insurance is one of the necessary evils of this world. It's not particularly exciting to talk about, it's expensive, and you have to have it. And yet, our data shows that 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. So, based on its necessity and the expense, it's not hard to understand why people are looking for affordable car insurance 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. However, insurers do use your credit score, education level, homeowners status, insurance history, and zip code (among other things) to determine your insurance rate — all of which can correlate with your income level. Let's look at each of these rate factors a little further.

  1. How to find cheap car insurance
  2. What impacts your premium that is related to income?
  3. Government programs for low-income auto insurance
  4. What about non-government programs?
  5. Additional resources and methodology

 

How to find cheap car insurance

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, there is a lot of variation depending on which carrier you choose. If you’re interested in seeing multiple car insurance quotes, enter your ZIP code below to get started.

Car Insurance Company
6-Month Premium
Allstate
$907
Farmers
$736
GEICO
$550
Liberty
$792
Nationwide
$654
Progressive
$716
State Farm
$598
USAA
$444

 

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Now that we’ve outlined shopping around is the best way to save on auto insurance, let’s outline some other ways to save.

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. There is no golden rule that indicates people with lower incomes have worse driving records than those who occupy a higher tax bracket. 

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.

Pay for claims out of pocket

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 3-5 years after an accident. Broken down below, you can see how much this would impact your rate.

At-Fault Accident SurchargeAnnual Premium
No Violation$1,470.00
After Violation$2,086.95
2nd Year after Charge$2,703.89
3rd Year after Charge$3,320.84

 

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.

  • Get an estimate for the repairs
  • Use our State of Insurance Analysis to see how much an at-fault accident raised rates in your state, and consider that value over 3 years.
  • Compare the value of the out-of-pocket repairs to the rate increase over three years plus your deductible. If it's cheaper to file a claim, do that.

 

Consider usage-based insurance companies

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.

 

Company

Estimated Savings

Progressive's SnapShot

Average of $130

Allstate's Drivewise

Average of 10-25%

State Farm's Drive Safe & Save

Up to 15%

Esurance's DriveSense

Varies

Nationwide's SmartRide

Up to 40%

Liberty Mutual's RightTrack

Average of 5-30%

 

In addition to the companies mentioned above, consider Root and Metromile. While not available in every state, these companies might be able to offer you some savings.

 

Be smart with your insurance coverage

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 damage 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.

 

Double check for discounts

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.


Multi-policy

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.

bundling discounts

 


Defensive driver discount

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, see our guide here.

 

Equipment discount

If your vehicle comes with an anti-theft device or services like LoJack, your insurance company usually provides you with a discount.

Anti-Theft Device6-Month Premium% Difference
None$735.00 
Audible Alarm$732.00-0.39%
Active Disabling Device$732.00-0.41%
Tracking Device$731.00-0.56%
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.


Multi-car discount

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 Transfer6-Month Premium% Savings
No$735.00 
Yes$724.00-1.45%


Advanced payment 

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 PurchasesAvg 6-month Premium% Savings
0 Days$735.00 
7 Days$712.50-3.06%
10 Days$707.00-3.80%


Profession/affinity discount

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 an affinity discount here.


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 discounts here.


Drive safely

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.

 

Accident/Violation6-Month PremiumIncrease
None$735 
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
Speeding$906$170.64
Operating a vehicle without permission$976$240.91
Open container$991$256.26
At-Fault Accident$1,043$308.57
Driving with a suspended license$1,194$458.86
Reckless Driving$1,252$517.18
Racing$1,277$541.80
DUI$1,278$542.98
Refusal to submit to a chemical test$1,279$544.31
Leaving the scene of an accident-hit and run$1,339$604.44

 

 

 

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Does your annual income impact your insurance premium?

There are a few things that insurance companies use when developing your rate that are indirectly tied to your income:

  1. Your credit score
  2. Education level
  3. Insurance history
  4. Homeowner status
  5. Your zip code

Your credit score

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 6-month policy than drivers with excellent credit. Per month, that’s a $118 difference!

credit score 6-month premium


These findings are reflected in our own State of Insurance report. While there are many circumstances surrounding your credit score, 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 here.


Your education

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 6-month premium difference between a driver without a high-school degree vs a PhD is $20.

Education Level

6-Month Premium

None$752
High School$743
Bachelors$735
Masters$732
PHD$732

 

Your insurance history

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 having low liability limits and high probability for filing a claim. As you can see below, the difference between no insurance history and five years of high-level coverage is $204 annually.

Insurance History

6-Month Premium

None$828
6 Months$778
1 Year$760
3 Years$742
5 Years$726


For more information on finding car insurance with an insurance history, see our related article here.

 

Your homeowner status

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.

Homeowner Status

6-Month Premium

Renter$735
Condo Owner$718
Home Owner$718

 

Your location

Your insurance rate is specific to 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 stolen vehicles or property damage claims can be seen as a risky investment to an insurance company.

 


Government insurance programs for low-income drivers

Because household income isn't directly used to determine monthly rates, most companies don't create special programs for low-income families. Still, there are a few state-operated programs and companies that are specifically designed to help.


California

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.

What are the requirements?

  • Combined Household Income, based on the number of people:
    • 1 = $30,150
    • 2 = $40,600
    • 3 = $51,050
    • 4 = $60,500
  • A good driving record
  • No at-fault accidents in the past 3 years
  • Must be at least 19 years old
  • Must own a valid driver’s license
  • Must own a vehicle that is valued less than $25,000 
  • And, naturally, a California resident

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

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.

How much does SAIP cost and what are the requirements to join?

SAIP costs $365 per year. This coverage is also dependent 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.

What does SAIP cover?

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.

What doesn’t SAIP cover?

As stated, this policy is for medical coverage only—so things like comprehensive or collision coverage aren't provided.

 

Hawaii

Hawaii provides a little more coverage for some of its residents through their 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:

  • You are blind
  • You have suffered from a physical or mental disability for at least 12 months which causes you to be unable to work
  • You live with and take care of someone who receives AABD benefits
  • You have a terminal condition that prevents you from working
  • Your Social Security or Supplemental Security Income doesn’t provide you with enough money

How to get coverage under AABD:

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.

 

 

Non-state affiliated programs

CURE

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

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

Usage-based insurance programs such as Root, Metromile, and other programs within big companies 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.

 

 

Low-income car insurance: summary

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, homeowner 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 6 months are great ways to start saving on insurance when you can't change the previously listed variables. When those fail, consider government or other special programs help.

 

 

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Methodology

Our methodology is based on public record filling from 2018. 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. In order to get car insurance rates for the specific low-income profiles we used, we changed certain aspects of our base profile — credit level, homeowner status, education, driving record, etc. 

If you'd like more information on our methodology, see our full State of Insurance Analysis report here.


Recent Questions:

Low-Income Car Insurance

Can I limit to children to only drive the cheapest vehicle?

California operates under a "rated driver" pricing system in auto insurance. Basically, all drives must be "rate" to a particular vehicle.

If I'm on social security can that lower my car insurance

Unfortunately, your income isn't a rating factor for your car insurance. While there are some programs that can help you, outlined here, I don't know any based in Louisiana.

Cheapest car for 16 year old male

Car insurance is incredibly specific - it can change based on your zip code and the VIN of your vehicle. So, it's going to be near impossible for me to give the company or car that will be the cheapest.

What's the cheapest company for a 60 year old man with a DUI

Because car insurance companies and through extension your insurance premium are incredibly specific, it's impossible for me to give you the exact company that is the cheapest. However, through our analysis here, we see that Liberty Mutual tends to be the cheapest company for a DUI conviction, all other metrics consistent.

Additional Resources:

Low-Income Car Insurance

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