Car insurance for unemployed drivers

Unemployment levels continue to drop in 2023, but if you are between jobs or concerned about job security, you may be looking more closely at your finances. If you’re thinking about modifying your car insurance policy to save some money, there are a few things you may want to keep in mind before reducing your coverage. Bankrate’s insurance editorial team analyzed some of the best car insurance companies, and we aim to help you find coverage that meets your needs and fits your budget. 

Will unemployment increase my car insurance premium?

Unemployment itself 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 may result in loss of coverage altogether. Keep in mind, though, that some policies might include a discount based on your job title (for example, discounts for nurses or police officers). Unemployed drivers might lose such a discount, which could impact premium.

Since auto insurance rates are calculated based on risk, one way that unemployment could impact your premium is if your credit score has decreased due to additional debt or missed payments. Unless you live in California, Hawaii, Massachusetts or Michigan, where credit is limited or banned as an auto insurance rating factor, your insurance company might raise your premium when your policy renews as a result of a lower credit-based insurance score. 

On the other hand, if you're driving less because you're no longer commuting, you may save a bit on your car insurance. Car insurance companies typically see lower mileage as a lower risk of accidents, so driving less could bring down your rate. 

How to save on 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 minimum insurance laws. Although your budget may be tight, there are ways you might be able to maintain an affordable policy.

Compare rates and check for discounts

Losing your job could present a good opportunity to ensure you're still getting a competitive rate for your car insurance. Different companies have unique pricing algorithms, so you'll likely get different quotes from different carriers for the same coverage types and levels. Many carriers offer online quoting that may allow you to easily see which company could offer you the lowest rates based on your personal rating factors. 

Additionally, you may want to talk to a company representative about potential car insurance discounts. You may qualify for savings that you weren’t aware of, which could help you lower your premium. Although not all insurance companies offer the same discounts, some of the most common discounts include good student, pay-in-full, automatic payment, paperless, good driver, good student, low mileage, and defensive driving. 

Check for payment options

Car insurance companies typically offer numerous payment options that might help you navigate your finances during unemployment. You may find that paying your premium in full earns you a discount. 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. You may be eligible for a discount if you sign up for automatic payments as well. 

If you find yourself unable to pay at the designated time, consider reaching out to your company to discuss your grace period. Most companies will give you extra time to pay before canceling 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 reveal ways to adjust your payment plan.

Consider pay-per-mile insurance 

If your mileage has decreased due to unemployment, pay-per-mile insurance may save you money on your premium. Pay-per-mile insurance charges you a monthly base fee and an additional per-mile fee for every mile you drive. Tracking your monthly mileage and comparing quotes for pay-per-mile insurance might help you decide if it may be a cost-saving choice for you.

Maintain a clean driving record

During your policy’s renewal each year, your insurance company will evaluate your level of risk. If you received tickets during the last year or were involved in an accident, your insurance company will likely increase your rates. Maintaining a clean driving record may save you from rate increases during your period of unemployment and help you continue to save once you start your new job. 

Consider your coverage levels and deductibles

If you're still struggling with your insurance rates, adjusting your coverage types and levels may be another cost-saving strategy. Although you will need to maintain your state's minimum coverage levels to drive legally, you could consider eliminating extra coverage types or reducing your coverage limits for potential policy savings. However, keep in mind that reducing your coverage may leave you with higher out-of-pocket costs if you were to be involved in an accident.

Raising your deductibles will also likely decrease your premium but would increase the amount you have to pay out of pocket if you were to file a claim. Speaking with a licensed insurance agent might help you identify if you have the appropriate coverage and deductibles in place for your budget.

Should I cancel my car insurance coverage to save money?

While dropping coverage entirely could seem like a way to save money while you're unemployed, having a lapse in your insurance policy may lead to a number of issues. First, coverage lapses may make it harder to get a new car insurance policy in the future. Secondly, you will likely pay a higher premium once you do find a policy. Beyond these practical impacts, there are legal consequences to lapsed coverage as well.

To drive legally, you are required to have at least the minimum amount of coverage mandated by your state. In most states, 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 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 unemployed, insurance is designed to protect your finances and is likely an important part of your overall financial health.

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