Most states require some level of car insurance. But with the average cost of full-coverage car insurance at $1,674 a year, not everybody can easily pay.
Insurers do not factor income when determining insurance premiums; you don’t pay less if you earn less. You may, in fact, pay more, because of insurance-industry practices that critics say discriminate against people with lower incomes.
“Lower-income customers are often forced to pay more due to the use of zip codes and employment in insurance underwriting,” says Nestor Hugo Solari, co-founder and CEO of Sigo, an auto insurance provider that aims to reach immigrants and Latinx customers.
If you don’t earn enough money to afford car insurance, you might not be able to get the coverage you need (or any at all). There are some low-income car insurance options available depending on where you live, but there’s no federal option.
State-Sponsored Insurance Options for Low-Income Families
Some states offer insurance plans and help to drivers who can’t afford to buy traditional car insurance. California, Hawaii and New Jersey all offer state-sponsored programs for their residents, and each have different approval standards.
California’s Low-Cost Auto Insurance
To qualify, you need to own a vehicle worth $25,000 or less, be at least 16 years of age, and earn no more than $32,200 a year for a single-person household. A two-person household moves income up to a $43,550 cap. Each driver also needs a valid driver’s license. The program only covers basic liability auto insurance, not comprehensive or collision coverage.
Hawaii: The Assistance to the Aged, Blind and Disabled (AABD) program
This program helps Hawaii residents who are 65 years of age and older or are disabled or blind and fall below 34 percent of the 2006 federal poverty line. The program provides cash benefits that go towards affordable car insurance.
New Jersey’s Special Automobile Insurance Policy
This policy costs $365 a year and is available to those with federal Medicaid with hospitalization. Not all Medicaid programs qualify for this policy. The policy only covers emergency treatment immediately following an accident up to $250,000. It also covers a $10,000 death benefit. There’s no liability, comprehensive, or collision coverage. There can only be one car per policy, and you can’t get a policy if your driver’s license or registration is revoked or suspended.
How Low-Income Drivers Can Save on Car Insurance
State-sponsored programs from California, Hawaii, and New Jersey are designed to give low-income drivers some form of coverage. That doesn’t mean they’re very helpful — especially compared to traditional car insurance.
“It’s a last resort for insureds who cannot find anyone to cover them,” Solari says. Hawaii’s program isn’t a car insurance-specific program, and both California and New Jersey have very specific guidelines you’ll need to meet.
There are other ways to save on car insurance premiums, if you know where to look. To start, use free online tools to request quotes and rates, experts say.
“Pick a few quotes you like and go to each company’s website to read policy and coverage details,” says Karen Condor, an insurance expert at 4AutoInsuranceQuote.com. “Research the company’s business ratings as well as customer complaints and customer service ratings. This will help you find the company with the best quality for the price you can pay.”
You can also raise your deductible, which lowers your monthly premium costs. Your deductible is what you agree to pay out of pocket before your insurance kicks in. You may also want to ask about what discounts are available, or what you qualify for. For instance, GEICO offers up to 22% in savings for drivers who have been accident-free for at least five years.
Several insurers offer programs which can reduce your premiums if you agree to have the insurer collect data about your driving habits. Those include Allstate’s Drivewise program and State Farm’s Drive Safe & Save, for example. Beware, though, that apps and devices that track your driving not only may raise privacy concerns; they also may raise your insurance premiums, if you engage in behaviors the insurer deems risky, like speeding or driving fast.
Usage-based programs like Allstate’s Milewise, a pay-as-you-go service, can reduce your premiums too. With Milewise, your daily rate plus your per-mile rate is your total cost per day. It’s not available in every state and isn’t necessarily the best option for you — especially if you have long commutes — but it might work.
Pay-per-mile offers the same full coverage as a traditional plan, including liability, collision, and comprehensive coverage, says William Miller, a spokesperson for Allstate. It also lets Allstate know about your driving habits.
If you are comfortable with letting an insurer know your driving habits, a tracking device or app can save you money.
The type of car you drive can also play a part in how much you pay for insurance, but there’s no hard-and-fast rule.
“The more expensive the car, the higher the cost of comprehensive and collision coverage because this needs to cover a higher value,” Solari says. “Despite this, newer [and] fancier cars also are less likely to be in accidents, so there is also the opposite effect on your liability coverage.”
If you’re paying more than you can afford in car insurance, you can shop around to find the best rate based on the type of driver you are, your credit score, your vehicle, and other factors. You can compare offers based on the lowest rate, discount opportunities, and terms for extra drivers and cars.
You can also ask your current insurance provider about any discounts or programs available to help you lower your car insurance costs.