Guide to low-income car insurance: What you need to know

Nationally, the average cost of state minimum car insurance is $56 per month for drivers with clean records and good credit. For drivers who need a full coverage policy, the average cost is $205 per month. For many Americans, that’s a significant chunk of their monthly income.

Low-income car insurance is offered at the state level, but it’s not widely available. There are only a handful of states that offer these programs: California, Hawaii, Maryland and New Jersey. Each state has its own requirements for low-income car insurance, and not everyone is approved for coverage.

In states where it exists, low-income car insurance is considered to be a last-resort option for drivers. It typically includes only the barest amount of coverage required by law, leaving drivers exposed to significant financial risk compared to those who can purchase additional insurance through a private company. You should only apply for low-income car insurance if you’re unable to find private insurance that you can afford.

The best low-income car insurance is different for every driver. You may find a policy that fits in your budget from one of Bankrate’s picks for the cheapest car insurance companies — or you might find quotes from a cheaper regional insurer by comparing rates. If you live in a state with a low-income car insurance assistance program that you qualify for, you might find the cheapest coverage there.

Keep in mind that the cheapest auto insurance is not always the best. Because car insurance exists to protect your finances against common risks associated with driving, a policy with more coverage could save you money in the long run despite taking up more space in your monthly budget. If you’re not sure how much insurance you should buy, speaking with an insurance agent could help you balance your immediate budget needs with the risks of being underinsured.

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.

Even if your state doesn’t subsidize car insurance for low-income drivers, it might be possible to secure lower-cost coverage by trying some of the following strategies.

• Look into car insurance discounts: Almost all insurers offer at least a few discounts, and many of them are easy to earn. For instance, you can generally earn a decent discount if you purchase your car and home (or renters) insurance from the same company or if you have more than one car on your policy.
• Switch insurance companies: It can be a good idea to do an informal audit of your policy 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. Every insurer has a slightly different method for determining rates, and a range of characteristics specific to you, your vehicle and your driving habits impact that rate. 
• Enroll in a telematics program: Most insurers offer telematics programs, which allow your insurance company to track your driving to analyze how safe you are on the road. Upon enrolling, you’ll typically receive an automatic discount of 5 to 10 percent. If you prove to be a safe and careful driver, you could be rewarded with a discount of up to 40 percent in some cases.
• Review your car insurance needs: If it’s been a while since you evaluated your policy, you could be paying for insurance that you no longer need. For instance, you could drop a rideshare endorsement if you no longer drive for Lyft or Uber. Or maybe you paid off your used car and no longer need full coverage. Work with your insurance agent to determine what is right for you.
• Increase your deductible: The deductible is the amount you pay out of your own pocket before your coverage kicks in after filing a car insurance claim for damage. The higher the deductible you select, the lower your insurance premium. Be sure to choose an amount that you feel comfortable paying on short notice.
• Improve your credit score: Although this step takes time, working on building credit or improving your score can have a big impact on how much you pay for car insurance. This is because insurers in most states look at your credit-based insurance score to help determine how risky you are to insure. People with poor credit scores are more likely to file claims, so companies often charge them higher prices.

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 in most states), but it can leave most drivers seriously underinsured. 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 directly 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 your credit history, the make, model and age of your car and your ZIP code.

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 for car insurance — 86 percent more, on average, than drivers with good credit — even if their driving record is clean.

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 due to the added risk of vehicle damage and insurance claims.

Frequently asked questions

Bankrate utilizes Quadrant Information Services to analyze December 2024 rates for all 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 single, 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 2022 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.