Guide to low-income car insurance

Almost every state requires a minimum amount of auto insurance to drive legally. Minimum coverage car insurance costs an average of $622 per year in the U.S. In contrast, full coverage — which includes collision and comprehensive insurance — costs an average of $2,014 per year. No matter the type of policy you need, you may find it difficult to pay for car insurance if you have limited income. To help, a handful of states offer car insurance for low-income individuals, but buyer beware — they are generally best kept as a last resort. Here’s why.

Nationally, the average cost of minimum-coverage insurance is $622. If paying this amount would be a hardship for you, you may qualify for low-income car insurance. This allows people who can’t afford standard car insurance to get coverage that is less expensive. Ultimately, the goal of low-income car insurance is to reduce the number of uninsured drivers on the road.

Low-income car insurance is offered at the state level, but it’s not widely available. There are only a handful of states that participate. Each state has its own requirements for low-income car insurance, and not everyone is approved for coverage.

Typically, you’re considered low income if you make under a certain amount of money and are enrolled in one or more government assistance programs. To qualify for low-income car insurance, you likely have to have a valid driver’s license in your state of residence and a clean driving record. Many states also have requirements for the value of your vehicle.

Low-income car insurance is considered to be a last-resort option for drivers. You should only apply for low-income car insurance if you’re unable to find private insurance that you can afford. Although low-income car insurance is cheaper, it doesn’t offer as much coverage.

Learn more: Guide to car insurance

Several insurance companies offer affordable prices. Individuals with a low income may want to consider obtaining minimum coverage from one of the top cheap car insurance companies as shown in the table below. Minimum coverage is more affordable than full coverage and can be one way to save, although people considering this option may want to discuss if that will be enough coverage with an insurance agent.

Along with minimum coverage — which only helps pay to repair damage others incur in an accident you cause — you can add other types of coverage to customize your insurance policy. These may include collision and comprehensive coverage to create a full coverage policy that helps pay for damage to your car.

It's worth noting that many insurance experts recommend gathering quotes from multiple insurers when you are hunting for the most affordable policy. Every insurer uses a proprietary method to determine its rates, so you are likely to receive a range of quotes, allowing you to choose the most reasonable price for the coverage you need.

To date, four states have developed low-income car insurance programs: California, Hawaii, Maryland and New Jersey. These programs differ from each other. Here are the details you need to know about each one.

Low-income car insurance in California

Low-income drivers in California can sign up for the California Low-Cost Automobile (CLCA) program. To qualify, your annual income must meet specific eligibility requirements and fall within 250 percent of the federal poverty level. In addition, you must have a valid California driver’s license, your car must be worth less than $25,000, you must be 16 or over and you need to have a clean driving record.

The CLCA program only offers liability and property damage coverage. Uninsured motorist and medical payments coverage are optional.

Low-income car insurance in New Jersey

New Jersey’s low-income car insurance program is called the Special Automobile Insurance Policy (SAIP). Besides a valid New Jersey license, the only requirement is that drivers must be enrolled in federal Medicaid with hospitalization.

Unlike other plans, this one just covers emergency medical costs up to $250,000 if you get into an accident. It doesn’t include coverage for liability or vehicle damage, but it does include a $10,000 death benefit. Insurance from SAIP costs only $365 a year, which is significantly cheaper than private insurance.

Low-income car insurance in Hawaii

Low-income drivers in Hawaii can get affordable coverage through the Assistance to the Aged, Blind and Disabled program (AABD). This program is only available to Hawaii residents who are 65 or older and meet the Social Security Administration’s legal definition of disabled or blind. Additionally, your income must fall below 34 percent of the 2006 federal poverty level, and you can’t receive aid that exceeds $2,000 for one person or $3,000 for a couple.

Low-income car insurance in Maryland

Maryland’s automobile insurance fund, also called Maryland Auto Insurance, sells vehicle liability insurance to drivers residing in Maryland who cannot obtain private liability coverage. The fund acts similarly to any private insurance company and must follow regulations by the Maryland Insurance Commissioner. The fund also covers certain claims with uninsured motorists or claims in the event of a hit and run.

Drivers must be rejected by a minimum of two private insurance companies or have had vehicle insurance canceled or not renewed for reasons excluding nonpayment in order to be eligible. To register a vehicle in Maryland, the owner of the vehicle must follow the minimum state requirements for coverage, which include $30,000 per person/$60,000 per accident in bodily injury liability, as well as $15,000 in property damage liability.

Even if you do not live in a state that has a low-income car insurance program, it is possible to secure lower-cost coverage by taking advantage of the following money-saving tactics.

Look into car insurance discounts

Almost all insurers offer at least a few discounts, and many of them are easy to earn. Consider, for example, the fact that you can generally earn a small discount if you purchase your car and home (or renters) insurance from the same company. This discount, called bundling, may also apply if you have more than one car on your policy.

Consider the vehicle make and model

Your vehicle's make and model play a role in determining the rate you pay for insurance. Cars that require expensive replacement parts typically demand higher premiums. For example, the average cost of full coverage for a BMW330i is $2,513. A Ford F-150 has an average rate of $1,753 per year for the same coverage.

Switch insurance companies

It can be a good idea to do an informal audit of your policy every year when it is up for renewal. Make sure your coverage is still right for you, and consider comparing new quotes to see if another insurer might offer you better value for your dollar. Keep in mind that every insurer has a slightly different method for determining rates, and several characteristics specific to you, your vehicle and your driving habits impact that rate.  

Enroll in a telematics program

Some insurers offer telematics programs. Upon enrolling, your driving behavior will be monitored. If you prove to be a safe and careful driver, you could be rewarded with a discount of up to 40 percent. Examples of such programs include Geico's DriveEasy and State Farm's Drive Safe and Save.

The definition of “low income” varies from state to state. In many cases, low income is determined by a percentage of the federal poverty levels, which are decided at a national level and used to determine eligibility for Medicaid and other programs. Qualifications for low-income car insurance are also determined on a state-by-state basis. For example, in Hawaii, only drivers who are older than 65 and meet other qualifications can qualify for the state’s low-income car insurance program.

Low-income car insurance can be a lifesaver for people who qualify and can’t afford private coverage. However, it is not the best option for everyone. That’s because low-income car insurance coverage is limited. It is not the same insurance you would get through a private provider. Most state-sponsored insurance programs offer minimal coverage to keep the price low. For instance, California drivers in the CLCA program only get liability and property damage coverage.

Low-income car insurance is a good option if you need coverage to avoid driving completely uninsured (which is illegal), but it is generally not a good option for anyone who is looking for comprehensive coverage. Low-income car insurance often has significant gaps that could lead to out-of-pocket expenses if you have to file a claim.

Technically, your income does not impact your car insurance rate. Unlike a loan, insurance companies do not review your income to determine if you should get approved for coverage. Other factors that may play a role include the make, model and age of your car, your driving record and other personal factors.

However, many of those factors relate to your income level. For example, if you have a low credit score, it could be because you have debts you cannot afford to pay because of your income. People with a low credit score may pay more money for their car insurance, depending on the state they live in, because they are considered high-risk.

Additionally, people with a low income might live in a neighborhood with a higher rate of crime. Individuals who live in ZIP codes with above-average rates of crime and theft tend to have higher insurance premiums.

Frequently asked questions

Bankrate utilizes Quadrant Information Services to analyze 2023 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

• $100,000 bodily injury liability per person
• $300,000 bodily injury liability per accident
• $50,000 property damage liability per accident
• $100,000 uninsured motorist bodily injury per person
• $300,000 uninsured motorist bodily injury per accident
• $500 collision deductible
• $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually.

These are sample rates and should only be used for comparative purposes.