Car insurance for unemployed drivers

Will unemployment increase my car insurance premium?

Unemployment itself does not have a direct impact on your car insurance premium. You can get insurance without a job, and losing your job does not typically result in a rate increase. Failure to pay your premium can result in loss of coverage, though. And some policies might include a discount based on your job title (for example, discounts for nurses or police officers), which would not apply if you lost your job and could drive up the cost of your policy.

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. To find out if you qualify for savings based on your annual mileage, contact your insurer.

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. Here are some of the best ways to secure affordable coverage so you can continue carrying car insurance while unemployed.

Compare rates

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.

Check for discounts

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, low mileage and defensive driving.

It’s also common for car insurance companies to offer a discount to customers who bundle more than one policy with them like auto and renters insurance. Progressive, State Farm, Allstate and Nationwide are a few of the providers who advertise savings for bundling.

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.

During a period of unemployment, car insurance may not be your first financial priority. 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 you may incur a late fee. 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.

Look into telematics programs

Telematics programs use an in-car device or phone app to track your driving habits. Your insurance company will use data points like how often you drive, your average speed, how often you brake hard and the time of day you’re driving to determine how safe of a driver you are. If you score well, you could save money on your premium. Be warned, however, if the data your carrier collects categorizes you as high risk, you could actually see a premium increase. These programs are ideal for people who observe the speed limit and don’t have higher-than-average mileage. If you’re unemployed and no longer fighting stop-and-go rush hour traffic, this type of program may work in your favor.

Consider pay-per-mile insurance

If your mileage has decreased due to unemployment, pay-per-mile insurance may save you money on your premium. With pay-per-mile insurance, you’re usually charged 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 could be a cost-saving choice.

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 or were involved in an accident, your insurance company will likely increase your rate. 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 a 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 damage 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.

Frequently asked questions