Car insurance for unemployed

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Losing a job can be devastating. When faced with unemployment, you may be concerned about obtaining or maintaining a car insurance policy. After all, most states require drivers to carry at least minimum amounts of car insurance. If your budget is particularly tight during an unemployment period, the expense of auto insurance could be stressful.

You are not alone in your struggle. The unemployment rate surged in 2020, increasing over 115% from 2019, likely due to the ongoing COVID-19 pandemic. If you are an unemployed driver, take heart. There are ways you can find a cheap car insurance provider so that you adhere to your state’s laws while protecting your finances. Bankrate’s research may help you find a car insurance company that provides the coverage you need within your budget.

How unemployment impacts car insurance

Being unemployed can be incredibly stressful, but when it comes to car insurance, the effects are fairly minimal. Unemployment does not have a direct impact on your car insurance premium. Losing your job does not typically result in a rate increase, although failure to pay your premium can result in loss of coverage altogether.

Car insurance premiums are based on risk. The riskier a driver is to insure, the more an insurance company will generally charge to compensate for the increased likelihood of filing claims. If being unemployed means that your vehicle usage has changed from a “commute” classification to a “pleasure” classification, you could even save a bit of money.

However, your job could indirectly affect your risk level. For example, if you often drive for your job, the increased annual mileage on your vehicle could lead to higher premiums since the increased road time equates to a higher likelihood of accidents. Additionally, some companies will ask what your job is to apply occupation-related discounts or specialized rates to your policy. However, other factors impact your rates much more than your occupation. Your driving record, the coverage you choose and the type of vehicle you have will all play a larger role in determining how much you pay.

What factors impact my car insurance rate?

Your car insurance premium is calculated using a number of factors. While your occupation may be used for job-specific discounts or special rates, there are other rating factors that impact your premium much more heavily:

  • ZIP code: In most states, your city and even your ZIP code can affect how much you pay. Accident rates, the incidence of vehicle theft and even the cost of healthcare, all of which can impact auto insurance premiums, can change between locations. There are some states that ban the use of ZIP codes as a rating factor.
  • Vehicle make and model: Some cars are cheaper to insure than others. The price of parts, the price of labor, the safety features and the statistical likelihood of accidents all go into factoring your insurance premium.
  • Annual mileage: Typically, driving more means paying more for car insurance. The more often you are on the road, the more likely you are to be in an accident.
  • Driving record: If you have tickets, accidents or DUI convictions on your record, you can generally expect to pay more for car insurance. Adverse incidents on your driving record indicate to insurance companies that you are more likely to engage in risky driving behaviors.
  • Age: Younger drivers tend to pay more for car insurance due to a lack of driving experience. As you get older, you should see your rates fall. However, not all states use age as a rating factor, so depending on where you live, your age may not affect your premiums.

How to afford car insurance if you are unemployed

If you are currently unemployed, you may not be driving as often as you were when you had a job. However, you likely need to maintain a car insurance policy to satisfy your state’s laws. Although your budget may be tight, there are ways to find and maintain an affordable policy.

Compare rates and check for discounts

If you are looking for a new policy or if you have an existing policy, losing your job could present a good opportunity to shop your coverage with different car insurance companies. Each carrier offers different rates, so the same coverage could cost a different amount. Shopping allows you to compare rates to find a policy that fits your budget. Additionally, you may want to talk to a company representative about potential policy discounts. You may qualify for savings that you weren’t aware of, which could help you lower your premium.

Check for payment options

Car insurance companies typically offer numerous payment options that could help you navigate your finances during unemployment. You may find that paying your premium in full earns you a discount and could save you money in the long run. If you don’t have the funds to pay in full, you might be able to break your premium up into quarterly or monthly payments. If you sign up for automatic withdrawals, you could lower your premium.

If you find yourself unable to pay at the designated time, reach out to your company to discuss your grace period. Most companies will give you extra time to pay before cancelling your policy, although a late fee may be charged. Similarly, if you are struggling to pay your car’s loan or lease payments, talking to a representative from your financial institution could uncover ways to adjust your payment plan.

How to save on car insurance if you are unemployed

Unemployment shouldn’t directly affect your car insurance rate, but you might struggle to afford the cost of your policy while you don’t have an income. One potential solution is to take advantage of discounts.

Here are some of the most common car insurance discounts, with an explanation of who may qualify:

Discount Who qualifies
Safe driver People with a clean driving record (no accidents or traffic violations)
Good student Full-time high school and college students with a minimum GPA level
Safety equipment Drivers who insure vehicles that have safety features like anti-lock brakes, an anti-theft system, airbags, etc.
Pay in full People who pay their premium in full
Defensive driving course People who successfully complete an approved defensive driving course
Multi-policy People who have two or more insurance policies with the same company

Because each car insurance company has its own set of underwriting regulations, the amount you save with each discount will vary. Getting quotes from several providers can help you compare available discounts and might show you how much each discount can save you.

How to find the right car insurance for you

If you need car insurance, your employment status will not necessarily limit you. However, looking for companies that offer low rates and discounts could help you manage your finances without an income. Here are a few strategies to keep in mind:

  • Shop around: Research car insurance companies in your area. Read reviews for each company, evaluate its financial strength and most importantly, find out what discounts it offers. Your research might help you find a company that meets your needs.
  • Decide how much coverage you need: If you have a lease or loan, your lender likely requires you to carry full coverage insurance. If you own your vehicle outright, you could choose to buy a liability-only policy. Just know that if you buy a policy without comprehensive and collision, your policy will not have coverage for damages to your vehicle. Additionally, lower liability limits might save you money on your premium, but could result in high out-of-pocket costs if you cause an accident.
  • Get multiple quotes: Once you’ve identified a few providers and determined how much coverage you need, compare quotes from several different companies. Contact each provider to find out rates and savings options with discounts, then compare to see which company can give you the best deal.

Why maintaining your coverage is important

If you are unemployed, you may not be driving your typical daily commute. While dropping coverage could seem like a way to save money, having a lapse in your insurance policy can lead to a number of issues. First, coverage lapses can make it harder to get a new car insurance policy in the future. Secondly, you could pay a higher premium once you do find a policy. Beyond these practical impacts, there are legal consequences to lapsed coverage as well.

You are legally required to have at least the minimum amount of liability (or other coverage) required in your state to drive. If you get pulled over and are found to be driving uninsured, you could lose your license and be fined. If you cause an accident without insurance, you will likely still be financially responsible for the damages and injuries you cause. This could lead to high out-of-pocket costs, a lawsuit and financial devastation. Although it may be hard to pay a car insurance bill while you are unemployed, insurance is designed to protect your finances and is an important part of your overall financial health.

Frequently asked questions

What is the best car insurance company?

The best car insurance company depends on your unique needs. Each company has its strengths and weaknesses. For instance, Geico might be among the best for cheap rates, but USAA scores highly for customer experience. The best car insurance company is unique to each driver, which is why shopping around before settling on a provider can be helpful.

What is the cheapest car insurance company?

The cheapest car insurance is also different for everyone. Rates vary widely by state, age and other unique factors. Getting quotes from multiple insurance companies is the only way to determine which provider will be the cheapest for you.

Is car insurance legally required?

Yes, car insurance is legally required in almost every state. Forgoing car insurance when you are unemployed might seem like a reasonable way to save money, but it can have expensive repercussions. You may need to assess your coverage and make changes to your policy if you cannot afford your typical monthly payment, but cancelling your coverage altogether is generally not advisable.

Does car insurance cost more if you are retired?

It depends. Being unemployed does not necessarily mean you have lost your job. Perhaps you are retired or have enough passive income that you do not need to work. Retirement does not affect your premium in and of itself, but other factors that are associated with retirement can. If you aren’t driving as much, you may pay lower rates. If you are in your 60s, your premiums may be lower. However, if you have a poor driving record or expensive cars in your retirement, you’ll likely see higher premiums.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor