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Car Insurance

Car Insurance for Low Income Households

While government auto insurance can be an immense relief for low income families, it’s important to know that it doesn’t provide the same coverage as a conventional policy.

The cost of living in the U.S. is constantly rising, and if you're one of the many families who earn an annual income of $40,000 or less, it may be impossible to stretch your budget to include something like car insurance premiums.

In the past few years, premium rates have continued to climb annually at a rate of 10 to 12%, while the average minimum wage has remained stagnant at $7.25/hour or, in other words, $15,000/year.

A recent study found that low income households allocate a whomping 30% of their paychecks to their car insurance provider, leaving them a scarce allowance for necessities such as groceries, medication, rent or mortgage payments.

While driving a vehicle without insurance is illegal in every state in the U.S., many individuals risk foregoing coverage in order to pay for these other essentials.

In the long run, foregoing auto insurance coverage will more likely lead to sizable, out of pocket payments than simply paying for a policy in the first place.

Uninsured drivers caught by law enforcement officials can expect expensive fines and the possibility of losing their license.

Furthermore, the inability to pay these fines is an offense punishable by jail time.

The consequences of driving uninsured are even worse when an accident occurs. Drivers without coverage will be held liable and can expect to pay for medical bills and property damages for the rest of their lives.

Simply paying for an insurance premium is easier said than done for those who don't experience the circumstantial restrictions of the lower class.

The Consumer Federation of America's director of financial services, Tom Feltner, challenges that, "Higher insurance premiums act to deny [low-income] Americans economic opportunity and also help to explain why so many low-income drivers drive without insurance."

The federation found that the 5 largest insurance providers, Allstate, Progressive, State Farm, Geico, and Farmers, don't offer premiums under $500/year for residents of the U.S. living in the lowest income areas.

Average car insurance premium in each state

The Insurance Information Institute argues that these providers aren't intentionally targeting these groups of people, but rather their rates are affected by a number of risk factors including car usage, theft, accidents, and repair costs which tend to be higher in low income neighborhoods.

But, how can low income individuals avoid living in these areas when it's most likely all they can afford of rent and mortgage?

These disadvantages have pushed a few states to fund government auto insurance for their low income residents in order to keep their drivers covered and their roads secure.

StateAverage Annual Premium
New Hampshire$983.00
New Jersey$1,905.00
New Mexico$1,371.00
New York$1,173.00
North Carolina$1,060.00
North Dakota$1,710.00
Rhode Island$2,020.00
South Carolina$1,316.00
South Dakota$1,557.00
Washington, D.C.$2,127.00
West Virginia$2,518.00

Which states offer low-income, government auto insurance?

California, New Jersey, and Hawaii are currently the only states that offer government lent car insurance.

Map of US states that offer government funded low income car insurance

California's plan is by far the most advanced. Their California Low Cost Automobile Insurance Program (CLCA) offers liability insurance to eligible low income residents at a maximum premium of $388/year.

Requirements for this type of coverage include a good driving record, a valid driver's license, driver age 19 or older, and a vehicle valued at $20,000 or less.

The program also takes into account family size and combined income, therefore only those who fall below the poverty line set by their state's poverty statistics will be eligible.

While government auto insurance can be an immense relief for low income families, it's important to know that this kind of insurance doesn't provide the same coverage as a conventional policy.

For example, medical coverage with a government plan is only provided for passengers and not the driver which is due to the fact that these drivers most likely receive free health care from their state. This selective omission allows the premium price to stay low.

Government insurance doesn't provide rental car reimbursement, GAP insurance, or roadside assistance.

It's also important to note that government insurance doesn't guarantee great customer service because they're typically handled through call centers.

Whether a person doesn't qualify for their state's government insurance, their state doesn't provide insurance, or they want more coverage than the government would offer, shopping for quotes and truly understanding your policy needs can help you find premiums as cheap as government issued insurance.

Free auto insurance quote comparison tools can unlock a variety of discounts including purchasing a policy online, receiving bills via email, being a student with good grades, or being a military veteran. Additionally, be sure to check out Insurify's Best Auto Insurance Companies list.

Insurance companies that specialize in low-income policies

These companies are able to keep their premium cost lower than most by requiring either a small, upfront payment or direct payments from your bank account.

Multiple discounts are also available to low-income drivers with these companies, but they're specific to each carrier.

While discounts may not bring down rates as low as one needs, these companies are at least more affordable than competitors.

It's important to remember that while government auto insurance is available and can be a quick solution to financial difficulties, individuals looking to save money should research quotes from as many providers as possible.

Making an educated decision about which policy plan would be the most beneficial to them at the most reasonable price.