We all want to save on car insurance and why not, premiums are only getting more expensive all across the country. But if you own and operate a motor vehicle on the roads, you must also own a car insurance policy. It’s the law. So in order to avoid paying hefty fines should you be pulled over and unable to produce a valid insurance card, you need to find an affordable policy.
That can be a real challenge for individuals and families living on a low income because companies determine monthly and annual premiums based on a variety of factors, none of which are household income. So this can leave low-income drivers in between a rock and a hard place. While many of the aspects that comprise your rate do have a connection to your income level, it’s mostly unrelated. That still doesn’t help much.
So if your income level isn’t what the companies use to figure out what you’ll be paying each year for car insurance, then what do they consider? It’s a combination of things that are grouped together to help insurance providers offer customers quotes based on each individual’s unique situation.
The major contributors to determining your rate are things like credit score, insurance history, the zip code of your residence, level of education, they even take into account whether you own a home or not. These things are all affected by your level of income and if yours is low then these components for calculating a car insurance rate could mostly work against you.
Although taking an individual’s credit score into account might be considered prejudicial, insurance providers have leaned heavily on this factor as a way of calculating driver’s rates because of recent studies that have found a direct link between an individual’s score and his or her likelihood to file a claim.
According to the study, motorists with low credit scores have a higher probability of filing a claim than those drivers whose credit scores are in great shape. As a result, the companies are protecting themselves by charging individuals with poor or fair credit nearly double than the rates paid by their counterparts with good or excellent credit.
If you’re a low-income individual or family, it’s very possible that your credit has been impacted in some way and that can make it very tough to find the car insurance that’s affordable for your limited budget. Experts saying improving your credit score can have a dramatic impact on your rates, helping you save as much as 15% on your premiums.
But that is sometimes easier said than done when you’re bringing in a low income and you have to make tough decisions as to how and where you allocate your money from week to week.
While your credit score can be the most impactful factor to affect your rate, there are others that play just as significant a role. These may be able to mitigate some of the damage that a low score might be having on your ability to get low-cost car insurance.
Companies will look at your level of education, did you graduate from college or not? What kind of degree do you have? This plays a similar role as your credit score in terms of assessing you as a risk. That’s because drivers who are highly educated are less likely to file a claim.
Zip code is also important as it tells the companies where you live. When they have that information, they cross-reference that region with their records as to population, crime rate, road conditions, and the number of claims that have been previously filed in that area.
Your insurance history also plays into the equation. Have you let coverage lapse in the past? Have your previous policies barely covered the legal minimums? The companies look at this as well to see how responsible you are about maintaining coverage because, you guessed it, this can tell them whether you’re a risk for them financially.
All of these things can be tough for low-income individuals who are trying to find good insurance.
What You Can Do
If you live in California, New Jersey, or Hawaii, there are government-sponsored programs to help low-income drivers get the policy they need. But if you’re not a resident in those states, it’s up to you to find an affordable policy.
The best thing to do is shop around for the best price. This may take some time but if you do your research you can find a policy to cover you on a low income. The trick is to keep your policy simple, don’t include anything that isn’t mandatory to keep you on the road (skip the rental car cost provision, for example). Finally, be sure you have a sensible, inexpensive vehicle. These cost less to repair and your insurance provider will quote you a lower rate as a result.
After you’ve looked around, give Insurance Doctor North Carolina to get a quote from us and see if we can’t beat the other guys’ rates. We understand low-income insurance can be hard to come by and we’re ready to work with you.