In every state except New Hampshire, drivers are legally required to have an adequate amount of auto insurance coverage. If you know the basics of car insurance, then you’d know that the yearly cost of auto insurance premium can be anywhere from $500 to $2,000, depending on the type of car insurance coverage. The minimum required car insurance coverage averages annually at $563, while full car insurance coverage averages at $1,738.
For individuals and families with a lower income or budget, this can be a financial strain for the years to come. Fortunately, there are state-sponsored car insurance options and specialized car insurance coverage from certain car insurance companies that deal in low-income auto insurance at an affordable rate.
Following the law regarding car insurance shouldn’t be expensive or hard. By shopping around and doing some research about your state’s minimum car insurance laws and requirements, you may meet the state requirements for affordable car insurance.
Here’s how you can qualify for low income auto insurance and what to know when it comes to this special type of car insurance coverage.
What is low income car insurance?
Low income auto insurance isn’t a regularly offered car insurance policy. It’s specialized car insurance for low-income policyholders and households who need assistance to meet state minimum requirement when it comes to car insurance.
Since 49 out of 50 states require a degree of car insurance coverage while driving, low-income insurance satisfies those requirements affordably for low-income customers. Like the minimum car insurance requirement laws, the purpose of low-income car insurance is to keep uninsured drivers off the road.
Four states, California, New Jersey, Hawaii, and Maryland, offer their own low-income car insurance programs for residents at an affordable price even for low incomes.
Typically, state-level coverage has some low-income requirements that applicants must meet. You must make a certain amount of money, have a tangible history of government assistance, and in some cases, must have specific health conditions. A valid driver’s license and a clean driving record are some more common qualifications for obtaining a low income auto insurance assistance from those states. The value, make, and model of the car matters too, as states won’t insure a car that’s over $25,000.
Lastly, low-income car insurance coverage is best used as an informed, last resort after comparing and contrasting your car insurance options. Low-income auto insurance offers the minimum liability and medical costs. If you’d want your car and damages covered, then you would have to additionally purchase collision and/or comprehensive car insurance.
What are some ways that those states offer their own low-income auto insurance?
As previously mentioned, only 4 of the 50 states offer their own government-sponsored car insurance for low income drivers and households that need assistance and cheap car insurance to insure their car. Depending on the state, government low-income insurances go by different names with varying requirements and qualifications low incomes need to meet.
Four states and how to qualify for low-income insurance if you’re a resident:
- California. California’s low-income automobile insurance program (CLCA) provides affordable car insurance coverage to qualifying drivers. The requirements are a good driving record, at least 19 years of age, a valid license, and an individual income of about $30,150, or fall within 250% of the poverty level set by the federal government.
- New Jersey. Home to the special automobile insurance policy (SAIP), which covers a low income driver’s medical expenses after a car accident. You may be required to have Medicaid already before getting car insurance assistance. The annual cost for a low income auto insurance is an average of $365. Comprehensive and collision coverage are never included in this low income car insurance.
- Hawaii. As the name suggests, Hawaii’s aid to aged, blind, and disabled program (AABD) not only helps low-income drivers but also drivers with declining health to insure their vehicle. Drivers with vision issues and mental or physical handicaps are eligible for AABD coverage.
- Maryland. The state of Maryland created the automobile insurance fund for their low-income residents. They primarily give car insurance coverage to people with a poor credit score or those unable to afford regular car insurance coverage. Drivers with a poor record are even able to find affordable car insurance coverage with the automobile insurance fund.
These are only the specific state-mandated plans for low-income uninsured drivers.
Naturally, if you don’t live in any of the aforementioned states, then these may be impossible for you to apply for those low income auto insurance programs and discounts.
However, if you put in some research, you may find that several insurance companies in your area offer minimum required liability insurance at a low-income affordable cost.
What’s a state’s minimum required car insurance, and why are we supposed to have an automobile insurance?
The car insurance that states require keeps people safe by holding drivers accountable for their own bodily injury and property damage in a traffic accident. It doesn’t matter to the government that you and your car are covered. Rather, it’s the damage you would cause and the people you could injure in a car accident that is the legal priority.
For this reason, collision and comprehensive insurance are add-on policies and are never included in low-income auto insurance of any kind. Half of the states also require uninsured or underinsured motorist coverage, while some require personal injury protection.
For a bodily injury liability, the legal requirement is $25,000 per person and $50,000 per accident. Property damage liability can go anywhere from $5,000 to $25,000. Low-income drivers may not be able to budget these car insurance costs, so car insurance policy specifically for low incomes that satisfies the same requirements is the smartest move.
A family of four with an income of $60,000 in California, for example, may apply for their state-sponsored car insurance coverages. Other families in other states may have to do some comparing and contrasting with car insurance companies to get cheap auto insurance for their vehicle.
How do I find the right low-income car insurance for me?
Finding insurance companies that offer lower income car insurance is all about comparison. You won’t need to narrow your search down locally as both national and regional car insurance companies do offer affordable low income coverage.
Here are a couple of tips and tricks for smart low-income car insurance shopping:
- Pay upfront. Paying for your auto insurance policy all at once may be a big what-if for low-income drivers. However, paying your car insurance coverage upfront can certainly save you 5% to 15% on your car insurance premiums annually.
- Prioritize discounts. There are several types of discounts that can apply towards a new car insurance policy purchase. A good driver discount can save a new driver up to 30% of money in automobile insurance, and defensive driving course certifications are known to lower car insurance premiums. You may be given a discount on your car insurance based on your job or GPA if you’re a student. Car Insurance companies are also eager to bundle their home and auto insurance plans for a discounted amount on automobile insurance premiums.
- Mind your credit score. Hawaii, Massachusetts, and California are the only states that don’t consider the credit score of new low-income policyholders. In most cases, a good credit score will save money on buying automobile insurance coverage. A good credit score would be around 670 to 739.
- Consider your car(s). Low-income insurance will only cover cars that are valued at $25,000 and less. A lot of the newer luxury or tech cars wouldn’t be covered by a low-income policy. At the same time, you may be given discounts on your automobile insurance premium for your car’s safety features such as a Lojack. What’s more, most car insurance companies give you discounts for having multiple cars under a single insurance policy.
- Keep a good driving history. Aside from qualifying for the good-driver discount, you’ll also want an above-par driving record for the car insurance companies to calculate your premiums. If your driving record looks better than the companies’ loss/revenue ratio, then you’ll receive favorable rates to insure your vehicle.
What else does the car insurance company look at when determining my auto insurance policy rates?
Before anything else is discussed, you should know that car insurance companies will never directly use your income in calculating your automobile insurance rates. As previously stated, car insurance companies may use something like your credit score, driving history, or car type. Insurance companies have found that higher-income policyholders tend to be less risk on the road, so they’ll want to weigh whether you are too risky or not. It’s an extremely common practice among insurers.
Some of the factors which may affect your automobile insurance rates are simple things like age, gender, marital status, or miles driven. The ones car insurance companies pay more attention to are your auto insurance coverage history and where you live. The insurer may request your zip code and calculate your car insurance policy premium based on your area’s crime rate, which can be counted as high risk. Your car insurance history will be checked for any gaps in coverage. Car insurance companies will also look into your automobile insurance claims history to see if you frequently filed any. Again, the fewer claims, the lower your car insurance policy rates will be.
How much does low-income auto insurance cost in your state?
The required liability coverage by the state is often the cheapest standalone plan. This assumes that the driver forgoes comprehensive or collision coverage. Adding these automobile insurance coverages to your car insurance policy can cost an additional $300 to $500 annually. A good rule of thumb is to drop comprehensive or collision coverage if your car insurance policy rates are more than 10% higher than the payout you’d receive at the time of an accident. This typical auto insurance bill would be $1,736 monthly.
If you cannot include that in your budget and are looking for something affordable, then low-income auto insurance is the better choice. The low income auto insurance rates vary by state and the car insurance company. A low-income driver may pay a automobile insurance premium as low as $250 or as high as $1,092. However, the average for a low income auto insurance is around $300 to $600. That’s about $40 to $200 a month per vehicle. Of course, this average is only for the national car insurance brands. You may find even lower automobile insurance premiums with regional insurers.
Here’s another affordable form of car insurance that is also recommended for low-income drivers.
If a standard auto insurance policy or one mandated by the government is out of your budget, then you might want to buy pay-per-mile car insurance. Normal rates are based on all the personal and vehicle information we’ve just gone over. Pay-per-mile rates are solely based on the number of miles you drive your vehicle. Usage-based insurance is the official name for it.
If your monthly mileage adds up to less than 1,000, then pay-per-mile may be the most sensible option for you. This is an especially cheap auto insurance plan for low-income drivers or households using their vehicles for essential and work travel. The average premium for this kind of cheap car insurance coverage is at least $20 a month. The rate may also be determined by the driving record and history of the drivers. And yes, it does come with comprehensive and collision automobile insurance coverage.
What kind of car insurance coverage do you need?
By now, you have all your big questions about what low-income insurance covers, how much low-income car insurance costs, and how you can legally qualify as low-incomes.
One more important thing to always think about is how much car insurance coverage you’ll need to drive your vehicle legally. This is the key to not only getting the best automobile insurance coverage but saving money as well. A lot of low-income drivers under a new automobile insurance policy will set their deductibles to a higher amount. Granted, you’ll have to pay more in the event of a car accident, but your automobile insurance premium will be much lower.
If you feel that you just need a vehicle to drive to and from work, pay per mile by the best national or regional insurer may be the cheapest option. Of course, reducing coverages on your policy is another way to lessen your monthly bills with your car insurance company.
The bundle discount on automobile insurance only works for new policyholders anyway. The 10% rule that was previously mentioned is used to gauge when an optional coverage is costing you a little more than you would like.
Should you choose to drop your comprehensive or collision insurance because it exceeds 10% of the payout, be aware that you don’t want to lower it past anything you can afford to pay out of pocket as deductible.
Lastly, if you choose to put your car in storage, it’s best just to get comprehensive coverage as opposed to just canceling your car insurance policy. A canceled automobile insurance policy is a red flag for car insurance companies and can result in higher car insurance premiums. Following auto insurance laws shouldn’t be expensive. Ask your insurer about low-income policies today.
You think you are paying too much for auto insurance? Insurance Navy can help you save some money!
Give Insurance Navy a call at 888-949-6289. We offer free, low-cost auto insurance quotes both online and in-person at one of our many locations. Good coverage can be very affordable.