Cheapest Car Insurance for Low-Income Drivers

Nearly every state in the country requires car insurance, with the average American paying $135 per month for coverage. But if you have a lower income, paying more than $1,600 every year for car insurance can be difficult.

While income itself isn’t a factor insurers use to calculate rates, it could be correlated with other factors that affect your car insurance premiums.

If you’re a low-income driver in the market for car insurance, you can take several steps to save money on your premiums, including shopping with companies that offer lower average rates, like GEICO, Allstate, and State Farm.

Key Takeaways:

• The cheapest car insurance companies for low-income drivers are Auto-Owners, USAA, State Farm, GEICO, and Allstate.
• You can save money on car insurance in a few ways, including getting multiple quotes, researching discounts, and re-evaluating your coverage needs.
• Several states — including California, New Jersey, and Hawaii — have state-sponsored programs that offer car insurance for drivers who can’t afford it.

5 Cheapest Car Insurance Companies for Low-Income Drivers

As a low-income driver, affording car insurance can be a challenge, even though income isn’t a factor insurers use when setting rates. Liability coverage at your state’s minimum limits will always be the cheapest coverage you can buy, but keep in mind that it may not provide enough financial protection. The average cost of a liability-only policy is $92, according to Compare.com data, but several companies offer considerably lower rates.

The table below breaks down the cheapest companies for liability insurance, as well as how much you’ll save compared to the national average.

Auto-Owners offers the cheapest liability insurance, with an average premium of $40 per month, according to our analysis. That’s 79% cheaper than the national average, making it a great option for drivers on a limited income.

Still, these rates aren’t necessarily accessible for every driver. Car insurance companies consider more than a dozen factors when setting premiums, so your rates will vary, depending on your unique insurance profile.

6 Ways Low-Income Drivers Can Get Cheaper Car Insurance

If you have a low income, you may find it challenging to afford car insurance. The good news is you can follow several steps to find more affordable coverage that more easily fits into your budget.

Let’s take a closer look at six ways to get cheaper car insurance.

1. Compare quotes from multiple companies

The best way to save money on your car insurance coverage is to compare quotes from multiple companies. As we outlined in the previous section, premiums vary significantly from one insurance company to the next. After all, each insurer uses its own formula to set rates.

By shopping around and getting quotes from several companies, you can find the best rate for your unique situation. Here are a few different ways to shop around for quotes:

1. Use a quote-comparison website: Insurance comparison sites let you get quotes from multiple companies at once. It’s easiest to compare rates when you can see them all in one place. It will only take a few minutes to see your quotes, and you only have to enter your information once.
2. Use a broker or agent: An insurance agent or broker is a professional who can shop around for insurance for you. Insurance companies pay brokers commissions, so they’re free to use and save you the time of shopping yourself.
3. Get quotes from multiple companies: Finally, you can compare insurance quotes by requesting individual quotes from multiple insurance companies and seeing which offers the best rate. Just keep in mind that this method is a bit more time-consuming because it requires completing multiple online quote forms.

2. Research eligible discounts

Most car insurance companies offer discounts to help their customers lower their premiums. Though your savings will depend on your insurer, state, and the type of discount, they usually range from 5% to 30% of your premiums — and many can be combined to offer even greater savings.

Some of the most popular types of discounts include:

• Bundling discounts: Most companies offer a discount when you combine your insurance products with one company. For example, you can save by bundling your car insurance policy with your homeowners or renters insurance policy. You can also save by insuring multiple vehicles on one policy.
• Good driver discount: You can save on your monthly premiums by being a safe driver in several ways. Some insurers offer a discount when you have no claims or violations for a certain amount of time, while others use usage-based programs to track your driving habits and reward you for driving safely.
• Vehicle safety discounts: You can get a discount for having certain vehicle safety features, such as an anti-theft device, passive restraint system, lane assist, anti-lock brakes, and more.
• Student discounts: If you or your child is a student, you can save on your car insurance for getting good grades or by living away at college without a vehicle.
• Affinity discounts: Many insurers offer discounts for drivers who are members or employees of certain partner companies or organizations. For example, you could save by being a military member, teacher, or member of a certain organization.
• Payment discounts: You can save based on the way you shop for and pay for your auto insurance, such as by shopping before you need coverage, agreeing to paperless billing, setting up automatic payments, or paying your entire premium up front.

3. Consider pay-as-you-go car insurance

Pay-as-you-go car insurance can help you save money by only paying for coverage when you actually need it. This type of insurance can be purchased in a few different ways.

First, companies like Hugo allow you to pay for car insurance only when you need it. You can buy as few as three days of coverage at a time and activate it instantly. If you don’t drive often, this type of policy gives you coverage when you need it but helps you save money when you don’t.

Another type of pay-as-you-go insurance is pay-per-mile insurance. With this type of policy, you pay a low monthly base rate and then a per-mile fee. Pay-per-mile could be a good option for people who work from home or otherwise don’t drive much but still need constant coverage.

4. Consider if state-minimum coverage is enough

If you want the cheapest coverage possible, consider purchasing a policy with your state’s minimum coverage. Though coverage requirements vary depending on where you live, they usually only include liability coverage, which is bodily injury and property damage liability. These policies are designed to protect other drivers on the road if you cause a car accident.

If you finance or lease your vehicle, liability coverage may not be an option. Lenders and leasing companies require drivers to have full coverage, which is more expensive because it adds protection for your vehicle on top of basic liability coverage.

But understand that these basic policies may not protect you as well as one with higher limits or additional coverages. Even if you don’t have a loan or lease on your vehicle, you should still consider full coverage, especially if your car is valuable. For example, if you wouldn’t be able to replace your vehicle out of pocket if it was totaled, full coverage may be worth the extra cost. Despite the higher monthly cost, it could save you a lot more money in the long run.

5. Drive a car that’s cheap to insure

The vehicle you drive can affect your car insurance premiums. Some vehicles may be more or less expensive to insure because of their safety features and ratings, how frequently they’re involved in claims, and how expensive they are to repair.

For example, if you drive a car that’s more frequently stolen (like late-model Hyundais and Kias) or has notoriously expensive repairs, you might end up paying higher insurance rates.

In the table below, you can see some of the cheapest vehicles to insure and their average monthly insurance premiums.

Average car insurance costs vary quite a bit from one vehicle to the next. For example, a Ford Explorer is 26% more expensive to insure than a Subaru Crosstrek. And the cost of the vehicle isn’t necessarily an important factor. Some of the most affordable vehicles on our list are also some of the most expensive to insure.

6. Take advantage of government-sponsored car insurance programs

Several states offer programs for drivers who struggle to afford or qualify for other insurance coverage. California, New Jersey, Hawaii, and Maryland offer low-income car insurance programs, but each one is different and has different requirements.

Let’s take a closer look at how each one works.

California

The California Low-Cost Automobile (CLCA) Insurance program helps good drivers with low incomes qualify for affordable car insurance. The program has income limitations ranging from $32,200 to $66,250 per year, depending on your family size. Eligible drivers can get liability insurance for between $244 and $996 per year, with discounts available for people with good driving records.

New Jersey

New Jersey’s Special Automobile Insurance Policy (SAIP) is available to drivers who are eligible for Federal Medicaid with hospitalization. Drivers who qualify can get coverage for just $365 per year, but it covers only medical expenses.

Hawaii

Hawaii offers free no-fault insurance coverage to drivers who receive government assistance benefits, have a valid driver’s license, and are the sole registered owner of their vehicle. To qualify, you must have exhausted all other options for obtaining no-fault insurance.

Maryland

Maryland’s legislature created the Maryland Automobile Insurance Fund (MAIF) to offer liability insurance to drivers who can’t get it elsewhere. Though the program has changed its name to Maryland Auto Insurance, it still serves the same purpose of offering coverage to drivers who have been denied due to poor credit, insurance lapses, past violations, or other high-risk factors.

Low-Income Car Insurance FAQs

Low-income families still have options for finding cheap auto insurance. Check out these answers to commonly asked questions to learn more.

Who has the cheapest car insurance?

It depends. Auto-Owners offers the cheapest average insurance rates, according to Compare.com data, but the most affordable auto policy may be different for each person. Each insurer uses its own formula to set rates, meaning some drivers may find cheaper coverage with a different company.

Which insurance companies cater to low-income drivers?

Several states have insurance programs designed for drivers with low incomes. And while there aren’t necessarily companies that cater to people with lower incomes, Auto-Owners, USAA, State Farm, GEICO, and Allstate offer the most affordable rates, according to our analysis.

Is there car insurance for low-income drivers in California?

Yes, California offers an insurance program specifically for low-income people who haven’t been able to get insurance elsewhere — CLCA. The program has an income cap based on household size.

Does income affect your car insurance rate?

No. Income level doesn’t directly affect car insurance rates, but it can be correlated to other factors that do, including credit history and past insurance lapses.

Data Methodology:

Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.

All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.

Sources:

1. Insurance Information Institute, “Automobile Financial Responsibility Laws by State,” Accessed May 2, 2024.
2. State of California, “California Low Cost Auto,” Accessed May 2, 2024.
3. State of New Jersey Department of Banking & Insurance, “Special Automobile Insurance Policy (SAIP),” Accessed May 2, 2024.
4. Hawaii Department of Human Services, “Hawaii No-Fault Insurance,” Accessed May 2, 2024.
5. Maryland Auto Insurance, “Who We Serve,” Accessed May 2, 2024.