The cost of living in the U.S. is constantly rising.

If your household falls under the federal poverty line, it may be impossible to stretch your budget to include something like car insurance premiums. The federal minimum wage has remained stagnant at $7.25/hour (which results in a salary of $15,000/year for full-time employees), while insurance premiums have continued to climb annually at a rate of 10 to 12 percent. Even families with more than one full-time worker may find it challenging to keep up with rising insurance rates.

To make matters worse, car insurance rates tend to be higher in low-income neighborhoods because of increased risk factors such as car usage, theft, accidents, and repair costs.

While driving a vehicle without insurance is illegal in almost every state in the U.S., many individuals risk foregoing coverage in order to pay other bills. But the consequences of driving without insurance coverage can be far more expensive. Those caught and found liable in an accident can face fines, license suspension, jail time, medical bills, property damages, and lawsuits.

The good news is that low income families can buy low-cost government car insurance both from certain states and from traditional insurance companies by qualifying for special programs.

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Average annual car insurance premiums in each state

Car insurance premiums can vary quite a bit based on where you live. Factors like population density (more people means a greater risk of accidents), property crime rates, climate, proximity of wildlife, and state-determined coverage minimums can all have a significant impact on rates. Here are the average annual premiums by state in 2018, according to each state’s Department of Insurance.

StateAverage Annual Premium
District of Columbia$1,284
Maine $556
New Hampshire$744
New Jersey $1,460
New Mexico$944
New York$984
North Carolina $520
North Dakota$428
Oklahoma $1,128
Rhode Island $1,544
South Carolina$916
South Dakota $692
Texas $1,044
Virginia $776
Washington $872
West Virginia$776

Government-sponsored car insurance

The disadvantages faced by low-income families have pushed a few states to fund government auto insurance for such residents in order to keep their drivers covered and their roads secure. Government public auto insurance may be an option for low income families or individuals with disabilities and may be sponsored by federal, state, or local government.

For now, only three states in the U.S. – California, Hawaii, and New Jersey – offer their residents some kind of low-income car insurance program. However, government policies can change at any time. It’s best to contact your local DMV to find out for certain if your state offers low-cost insurance or other financial assistance.

California’s Low Cost Auto Insurance Program (CLCA)

The CLCA program, created in 1999, provides liability coverage to low income families with good driving records in the state of California. Car insurance coverage limits set by the CLCA are lower than California’s standard minimum requirements. Drivers in the program are therefore excused from meeting the state’s requirements.

While annual premiums vary based on your county, they can range anywhere from $256 to $611. If there is a single, male driver aged 19-24 in your household, his premium will be 25 percent higher than the base rate because such drivers are considered high-risk.

This program requires that ALL vehicles in a household be insured through the CLCA. You cannot have liability coverage with any other insurer. There are discounts available to drivers with good driving records within the past 3 years.

Anyone who qualifies for this program is allowed to have two policies, which means you can get insurance for up to two cars. If there are two qualified drivers in the same household, each can have two policies for a total of four in all for the entire household.

To qualify for California low income car insurance you must meet certain eligibility requirements. First, there’s an income limit based on your household size.

Household sizeMaximum household income

You must also have a valid California driver’s license, own a vehicle valued at no more than $25,000, and be at least 16 years old.

The basic California low cost auto insurance policy has the following coverage limits:

  • $10,000 for bodily injury or death per person
  • $20,000 for total bodily injury or death when multiple people are hurt in an accident
  • $3,000 for property damage

For an additional charge, drivers can add:

  • $1,000 medical payments per person
  • $10,000 uninsured motorist bodily injury per person
  • $20,000 uninsured motorist bodily injury per accident

This program does not offer collision or comprehensive coverage, but such coverage can be purchased elsewhere.

New Jersey’s Special Automobile Insurance Policy (SAIP)

New Jersey’s low income car insurance program is for medical coverage only. You must be currently enrolled in Federal Medicaid with Hospitalization and have a current valid driver’s license (not revoked or suspended) to qualify.

The Special Automobile Insurance Policy (SAIP) covers your emergency treatment immediately following a car crash of up to $250,000. It also provides a $10,000 death benefit should the worst happen. However, SAIP does NOT provide you with liability auto insurance coverage, collision and comprehensive, or other medical costs that would be covered through Medicaid such as doctor visits.

A household of people enrolled in Medicaid who share one car can all be covered by the same policy. However, each car will need its own policy. Note that only individuals enrolled in a qualifying Medicaid plan can get a SAIP policy; other members of the household will have to find auto insurance elsewhere.

A special automobile insurance policy can be obtained at most insurance agencies. You can call the Personal Automobile Insurance Plan (PAIP) customer service number at 1-800-652-2471 or search for a PAIP producer online. As of 2018, your SAIP premium will be $360 per year if you pay up front or $365 per year if you pay in two installments.

Hawaii’s Low Cost Disability Auto Insurance Program

The state of Hawaii may provide car insurance to residents who get financial assistance as part of the state’s Assistance to the Aged, Blind and Disabled (AABD) program. This program provides cash benefits for food, clothing, shelter, and other essentials to qualifying residents of Hawaii. To qualify for AABD, you must be one of the following: 65 or older, legally blind, totally and permanently disabled, or living with and taking care of someone who receives AABD financial assistance. You must also have countable income below 34% of the current Federal Poverty Level. Auto insurance under this program is free of charge.

Getting cheap car insurance from insurance carriers

Auto insurance carriers look at different factors and weigh them differently when setting the rate for a particular policy. That’s why quotes can vary so widely from one carrier to another, even if you’re looking at identical coverage. Shopping around and comparing rates is critical if you want to get the best deal. It’s also important to see if you qualify for any discounts, as most insurers offer several different types.

Here are the average annual car insurance premiums for some of the nation’s biggest insurers, using data from each state’s Department of Insurance:

  • Geico: $901
  • Nationwide/Allied; $1,227
  • State Farm: $1,313
  • Farmers: $1,351
  • Progressive: $1,415
  • Allstate: $1,758

Keep in mind that these numbers are just averages. Your unique history and situation will have a major effect on how much insurers charge, so get quotes from several different carriers and not just the ones with the lowest average rates.

Making smart coverage choices can lower your premiums, sometimes by a huge factor. Start by finding out the minimum coverage requirements for your state; you’ll need to get at least that much coverage in your policy to stay on the right side of the law. Setting a higher deductible will reduce your premiums, but don’t set the deductible so high that you can’t afford to pay for repairs should an accident occur.

The type of vehicle you drive will also have an impact on your car insurance premiums. Reliable vehicles such as family sedans and minivans are usually cheaper to insure, especially if they’re used. If your vehicle is old and could be easily replaced, consider opting out of or lowering your collision and comprehensive coverage. These coverages will pay you in the event of an accident or theft, but if the cost of repairs would be more than the entire vehicle is worth, you probably don’t need this coverage.

Coverage on individual cars in the home does NOT have to be the same. Older cars that could be easily replaced may not need collision coverage, but your spouse or partner’s new car definitely does. Customizing coverage for each car will keep you from paying unnecessary expenses.

Families that live together and drive together can pay together. Having multiple drivers and cars on the same policy unlocks multi-car and multi-driver discounts.

Even if it’s not required where you live, it’s a good idea to complete a driver’s education and/or defensive driving course. This shows that you’re serious about being a safe, responsible driver and carriers will reward this behavior with a discount.

Wendy Connick is the founder and owner of Connick Financial Solutions, a provider of tax and bookkeeping services and a QuickBooks Online Certified ProAdvisor. A long-time freelance writer, she specializes in business and finance articles on subjects including taxes, investing, and retirement. Wendy is an Enrolled Agent (EA), the only federally-licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. She is a member of the National Association of Enrolled Agents and a certified volunteer for VITA (Volunteer Income Tax Assistance), an IRS-sponsored program to provide free tax help for low-income individuals and families.

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