Although car insurance is required in most states, it can be a financial burden for many Americans. The annual cost for car insurance is $563 for minimum coverage, and $1738 for complete coverage.
Car insurance is expensive, even though the cost varies by state. People with low incomes who cannot afford car insurance are more likely than others to drop insurance altogether. This can lead to serious financial problems.
Low-income people who cannot afford standard insurance may have an alternative: enroll in low-income auto insurance.
What is low-income auto insurance?
Low-income car insurance can be a type insurance that is only available to families with low incomes. This insurance allows those who cannot afford standard car insurance to have coverage that is cheaper. The ultimate goal of low income car insurance is to decrease the number of drivers who are uninsured.
Although low-income car insurance may be offered at the state level, it is not widely available. This type of insurance is only available in a few states. Each state has its own criteria for low-income auto insurance and not all are eligible for coverage.
You are considered low-income if your income is below a certain level and you are enrolled in any government assistance program. A valid driver’s licence in the state where you live is required. You must also have a clean driving record. There are many requirements regarding the vehicle’s value.
Low-income car insurance should only be considered a last-resort option by drivers. If you are unable to afford private insurance, you should only apply low-income car insurance. Low-income car insurance may be cheaper but it does not offer the same coverage.
Low-income people get the best car insurance rates
Many insurance companies offer affordable rates. A minimum coverage policy may be an option for those with low incomes, as indicated in the table below. Although minimum coverage can be more affordable than full coverage, it is a way to save money. However, people who are considering this option might want to talk to an agent about whether they will have enough coverage.
| Car insurance company | Minimum coverage: Average annual premium |
|---|---|
| USAA | $351 |
| Erie | $360 |
| Geico | $363 |
| Auto-Owners | $364 |
| Amica | $368 |
You can also add extra features to your coverage options.
State-sponsored options available for families with low income
Only four states currently offer low-income car insurance: California, New Jersey and Maryland. These are the eligibility requirements for each of the three plans.
California
California low-income drivers can sign up to the California Low Cost Automobile Program (CLCA).
Your annual income must be less than 250 percent of the federal poverty line to qualify. A valid California driver’s licence is required. Your car must not exceed $25,000 in value. You also need a clean driving record.
The CLCA program does not provide liability or property damage coverage. Optional coverage for uninsured motorists and medical payments is available.
New Jersey
The Special Automobile Insurance Policy is New Jersey’s low income car insurance program. Only one requirement: drivers must have a valid New Jersey driver’s license.
This plan covers only emergency medical expenses if you are involved in an accident, unlike other plans. It does not cover liability or vehicle damage.
SAIP insurance is $365 per year which is considerably less than private insurance.
Hawaii
The Assistance for the Aged Blind and Disabled program can be affordable for low-income drivers in Hawaii.
Only residents of Hawaii who are 65 years old or older and meet the legal definitions of blind or disabled by Social Security Administration can apply for this program. You must also have a income below 34 percent of 2006 federal poverty levels. Additionally, you cannot receive aid exceeding $2,000 per person or $3,000 per couple.
Maryland
Maryland’s automobile insurer fund (also known as Maryland Auto Insurance) sells vehicle liability insurance for Maryland residents who are unable to obtain private coverage. The Fund functions in the same way as any private insurance company, and must comply with regulations set forth by the Maryland Insurance Commission. The fund covers uninsured motorists and in the case of a hit-and run.
To be eligible, drivers must have been rejected by at least two private insurance companies. They must also have had their vehicle insurance cancelled or not renewed it for reasons that exclude nonpayment. Maryland’s minimum requirements for coverage must be met before a vehicle can be registered.
Who should have low-income auto insurance?
For those who cannot afford private insurance, low-income car insurance could be a lifesaver. It is not the best choice for everyone and not all are eligible.
Low-income car insurance is available for those who can’t afford private insurance.
Low-income car insurance coverage, however, is not available. This insurance is not comparable to what you would receive through a private provider. To keep costs low, most state-sponsored insurance programs only offer minimal coverage. California CLCA drivers only receive liability and property coverage.
If you are looking for coverage to prevent driving without insurance (which is illegal), low-income car insurance may be a good choice. If you are looking for complete coverage, it is not an option. If you need to file a claim, low-income car insurance can have significant gaps.
How income influences car insurance rates
Your income is not considered to affect your car insurance rate. Insurance companies don’t look at your income to decide if you are eligible for coverage.
Insurance companies instead use other factors such as your credit score and claims history to calculate your premium.
Many of these factors are related to your income. A low credit score could indicate that you are unable to pay your debts due to your income. Because they are high-risk, people with low credit scores pay more for car insurance.
People with low incomes might also live in areas with higher crime rates. Higher insurance premiums are paid by those who live in ZIP codes that have high crime and theft rates.
Questions frequently asked
Which company has the lowest car insurance?
The lowest car insurance rates differ by state. A driver’s zip code, age and credit history as well as their car and driving record will all impact the rate they pay. Our research shows that State Farm, Nationwide, and Geico tend to have consistently low premiums.
How can you save money on your car insurance?
There are many ways that drivers can save money on their car insurance. You can take advantage of discounts, improve your credit score, increase the deductible, and take a defensive driving class. Also, shop around for quotes so you are paying the lowest possible rate.