Finding cheap car insurance quotes is never easy, and it can be especially hard for low-income drivers. That’s because premiums are based on factors including residence, occupation, education level and credit score — all of which can make car insurance for low-income drivers particularly pricy.
In addition, auto lenders often require borrowers to buy comprehensive and collision coverage in addition to the legally required liability coverage. This can bump up annual premiums to over $1,500, according to the Consumer Federation of America.
Two states, California and New Jersey, offer programs that provide low-cost insurance for low-income drivers. The idea is to minimize the number of people driving without coverage, which is illegal and can lead to a financial nightmare in the event of an accident.
Legislatures in several other states, including Maryland, are assessing whether to test similar programs, according to the Washington Post. In Detroit, where car insurance costs $10,000 a year, the City Council is considering creating its own program to improve affordability.
California’s Low Cost Auto Insurance Program, established in 1999, is designed to provide low-income residents with liability insurance at affordable rates. To be eligible, drivers must have a valid California driver’s license, own a vehicle valued at $25,000 or less, be at least 19 years old, and meet income eligibility requirements (for a household of two, the maximum income allowed is $39,825). Annual premiums range from $213 to $472.
New Jersey offers a Special Automobile Insurance Policy to those whose income qualifies them for Medicaid. The policy costs just $365 per year if paid in two installments, or $360 when paid upfront. It covers up to $250,000 for treatment immediately following an accident and provides a $10,000 death benefit, but it doesn’t provide liability, collision and comprehensive coverage.
How to make your car insurance more affordable
There are a few actions drivers can take to save money on their car insurance premiums, regardless of their income, education level, location or credit history.
First, always shop around and compare plans. A NerdWallet study found that U.S. drivers overpay on their car insurance by an average of $859 annually, and comparison-shopping can help drivers save 32%.
Consider driving your car less and taking public transportation more often. Insurers determine part of your annual premium based on how much you drive, so more mileage means a higher premium.
Insurers may offer drivers several discounts. For instance, you could get a discounts for having car safety and security features installed in your vehicle, completing a defensive driving course and having a safe driving record for a number of years.
Image via iStock.