On a tight budget? We've got you covered.
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 the people who earn between $10,000 - $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 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, insurance companies 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.
Data shows that the people who earn between $10,000 - $19,000 per year pay nearly as much as those who earn more than $200,000 per year.
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 insurance companies look at studies like the one from the Federal Trade Commission which have shown that drivers with low credit scores are more likely to file a claim than drivers with high credit scores. These findings are reflected in our own State of Insurance report which demonstrates that drivers with poor credit (524) pay more than twice as much for car insurance than those with excellent credit (823). While there are many circumstances surrounding your credit score, raising your credit score can save you around 17% on your auto insurance.
Statistically speaking, the more education you have received, the more likely your insurance rate is going to decrease. Nationally, you can expect to save $36 per year if you have a PhD versus not completing high school. Like your credit score, insurance companies see drivers with more years of education less likely to be claims payout recipients. Therefore, the savings you receive while pursuing higher education will save you a few bucks per year.
|Insurance History||Avg Annual Premium|
|1 Year with 50-100 BI Limit||$1,356|
|3 Years with 50-100 BI Limit||$1,323|
|1 Year with 100-300 BI Limit||$1,317|
|5 Years with 50-100 BI Limit||$1,311|
|3 Years with 100-300 BI Limit||$1,287|
|5 Years with 100-300 BI Limit||$1,276|
Having a good history with your insurance companies can save you money in the long run. However, having gaps in your coverage or having the bare minimum of coverage can cost you. Companies view those with continuous coverage as more financially responsible than those with gaps or long periods of having the bare minimum. Again, we can see why this affects those with lower income harder than those who are able to continuously pay for auto insurance and maintain above minimum coverage.
Your insurance rate is specific to your zip code. Insurance companies 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. As 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.
Insurance companies can’t legally ask your income to determine your rate, but they are able to use other metrics that are often (but not always) correlated to your income level. There is not a golden rule that 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.
Shopping for car insurance every 6 months is the best way to ensure you’re getting the best rate. You can use our calculator here to see how much you could be saving.
Although some of the following discounts are automatically added, you will still want to comb through your 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.
|Renter||Homeowner||Rent w/ Multi-Policy||Home w/ Multi-Policy|
If you’ve taken a defensive driving course, your insurance company may reward you with a discount on your premium.
If your car comes with an anti-theft device or services like LoJack, your insurance company usually provides you with a discount.
Average Savings from Safety Devices
|Safety/Anti-Theft Device||Avg Annual Premium||Discount|
|Passive Disabling Device||$1,312||$10|
|Electronic Stability Control||$1,318||$5|
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 car with a single insurance company.
This method refers to the manner you chose to pay your insurance. 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.
Average Rates by Payment Plans
|Paid In Full||Installments||Savings|
Statistically, some occupations like teachers, physicians, or police officers are less likely to file a claim. Because of this, some insurance companies return the savings back to you.
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.
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. If you're cautioned for speeding or file an at-fault claim, you'll be rated (or charged) for 3 years in most states. What's more, if you have a good driving discount, you will lose that and be ineligible for it until the citation or claim falls of your insurance record. All the more reason to drive safely. Below are some national averages for citations.
Average Increase in Annual Premium in 2016
|Speeding 11 - 15 MPH Over Limit||$141|
|Speeding 16 - 20 MPH Over Limit||$153|
|Speeding 21 - 25 MPH Over Limit||$165|
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 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 and property 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 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.
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 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:
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.
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, shopping for car insurance every 6 months are great ways to start on 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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