Car Insurance for Unemployed

Christel Deskins

© Carlina Teteris/Getty Images Young couple shops for insurance rates on a smartphone. Car insurance isn’t cheap, and when you’re unemployed, finding room in your budget for insurance can be nearly impossible. You might be tempted to drop your car insurance altogether to save money, but driving uninsured is illegal […]

a person sitting on a table: Young couple shops for insurance rates on a smartphone.

© Carlina Teteris/Getty Images
Young couple shops for insurance rates on a smartphone.

Car insurance isn’t cheap, and when you’re unemployed, finding room in your budget for insurance can be nearly impossible. You might be tempted to drop your car insurance altogether to save money, but driving uninsured is illegal in almost every state. The good news is that there are ways you can save money on your car insurance while you’re unemployed without cancelling your coverage. This article will explore your options.


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The effect of unemployment on car insurance

Being unemployed can be incredibly stressful, but when it comes to car insurance, the direct impact is fairly minimal. Unemployment essentially has no noticeable effect on your car insurance premium. Losing your job does not result in a rate increase directly, although failure to pay your premium can result in loss of coverage altogether. If you recently filed for unemployment benefits however, your insurance company won’t use that against you.

Generally speaking, insurance companies have limited access to information about your profession. When you purchase an auto insurance policy, you are not required to disclose who your employer is, or what you do for a living. That means you can purchase a new insurance policy, or switch to another provider while you’re unemployed without any issues.

The only time an insurance company knows about your profession is if they offer job-related discounts that you can take advantage of. For example, maybe you’re a teacher and you qualify for 10% off your premium because of your job. When your policy is up for renewal, the insurance company can request to see your teaching license, and if you’ve lost your job, you would no longer be eligible for the discount.

Even in that scenario, being unemployed wouldn’t cause your rate to increase more than it would normally without the discount. You could also use that time to find other discounts to avoid the rate hike.

How to save on car insurance if you are unemployed

Unemployment won’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 for this outcome is discounts. Ultimately, car insurance providers want you to keep your policy active, so most companies offer ways that drivers can lower their rate.

Here are some of the most common car insurance discounts, who qualifies and how much you can expect save:

Discount Who qualifies Average savings
Safe driver People with a clean driving record (no accidents or traffic violations) 10% to 40%
Good student High school and college students with a minimum GPA 8% to 25%
Safety equipment People with an anti-theft system, anti-lock brakes, airbags, etc. in their car Up to 40%
Pay in full People who pay their annual premium in full 10%
Defensive driving course People who take an approved defensive driving course 5% to 10%
Multi-policy People who have two or more insurance policies with the same company 5% to 25%

Gallery: Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year? (Money Talks News)

How to find the right car insurance

If you need car insurance, your employment status will not necessarily limit you. However, it would be wise to look for companies that offer low rates and discounts. Here are a few strategies to keep in mind:

  • Shop around: Research car insurance companies in your area. National providers, such as Geico or Allstate, usually offer cheaper coverage than local companies. Read reviews for each company, evaluate its financial strength and most importantly, find out what discounts it offers.
  • Decide how much coverage to get: Next, determine how much coverage you need. If you have a lease or loan, your lender likely requires you to carry full coverage insurance. If you fully own the car, you can choose your own level of coverage. More coverage is going to be more expensive, but it could save you a lot of money out-of-pocket if you get into 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 you should not cancel your coverage

If unemployed, you are likely to be driving less without a commute. While dropping coverage seems like a way to save money, having a lapse in your insurance coverage leads to a number of issues that are not worth the cost. First, gaps in coverage can make it harder to get a new car insurance policy in the future. Secondly, you may lose on a lower rate when you choose to renew. Beyond these practical impacts, there are legal consequences to lapsed coverage as well.

For your primary vehicle, you are legally required to have at least the minimum amount of liability (or other coverage) required in your state in order to drive. If you get pulled over and are found to be driving uninsured, you could lose your license. In addition, it’s incredibly risky to be driving uninsured in case of an accident.

Frequently asked questions

What is the best car insurance?

The best car insurance company depends on your unique needs. Each company has its strengths and weaknesses. For instance, Geico might be 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 it’s important to shop around before settling on a provider.

What is the cheapest car insurance?

The cheapest car insurance is also different for everyone. A driver with a near-perfect credit score might get the lowest rate from Allstate, whereas a driver with a poor credit score might get the cheapest rate from Geico. Rates also 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. New Hampshire is the only state that doesn’t require traditional car insurance. Instead, New Hampshire drivers must carry something called proof of financial responsibility, which is essentially a form of liability coverage. Driving without car insurance comes with heavy fines, and for a second or third offense, you could also lose your license or have your car impounded.

What factors impact my car insurance rate?

Your car insurance premium is calculated using a number of factors. For example, your state, age, driving record, credit score and claims-history are all used to determine your rate. Additionally, the type of car you drive, the age and condition of your vehicle and the number of miles you drive every year are also considered.

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