Auto Insurance

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Car Insurance for Unemployed People

A common question that comes up is how being out of work affects your auto insurance premium. This articles aims to answer this question.

Being unemployed will affect almost everything about your lifestyle, and your driving is part of it. Insurers charge unemployed people more, due to two main reasons:

  • People who desperately need money might try to commit insurance fraud. When you have a job and a stable source of revenue, you are likely to weigh the risks better and give up the thought.
  • If you have an accident and repairs aren’t very expensive, you will want to pay out of your pocket and protect your no-claims bonus. However, if you are unemployed and broke, you don’t have much choice than file a claim. The insurance company understands this risk and will bill you more.

You may even be denied for insurance if you don’t score well on the rest of the evaluation criteria. If you have a poor driving record and a low FICO score, losing your job might only be the tip of the iceberg.

However, insurance carriers also understand that not everybody fits the stereotype of a group they happen to be a part of. Just because you are unemployed it doesn’t mean you are a felon or a sloppy driver who will cause an accident per day by the time he gets a job. Don’t despair; there are ways you can save on auto insurance.

Re-evaluate your driving needs

Your driving needs will change radically if you lose your job. You will stop driving to work and start driving around to get to interviews. Estimate your mileage for the next few months and see if it’s higher or lower than what you previously had.

  • If you believe you will be driving less, contact the insurer and apply for a low mileage policy. You probably won’t be leaving on vacation, and if you drive around in your town then you should easily fit in the 5,000 miles/year mark that entitles you to a hefty discount.
  • If you believe you will be driving more, try not to contact the insurer unless you really have to. Most insurance carriers ask you to notify them within 30 days of any change of residence, marital status or work place, so there is no need to declare your employment status any sooner.

Cancel registration of other vehicles

If you own more than one car, you will want to sell one of them or hand in its license plates until you get a job. Keep only a low-profile car that is cheap to insure, doesn’t cost an arm and a leg to repair and isn’t likely to be stolen.

Only keep liability insurance

You will also want to cancel all policies and options on top of liability. It’s not exactly the safest option, but will cut down a major part of your expenses. Liability with minimum state-mandated limits costs a few hundred dollars a year, whereas the average cost of a collision or comprehensive policy is well above $1,500.

Further Reading