Does being unemployed affect your auto insurance?
Unemployment cannot affect your ability to qualify for auto insurance, but being unemployed can affect your car insurance rates. Some insurance providers consider unemployed drivers to be high risk.
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UPDATED: Apr 6, 2022
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- Auto insurance is compulsory in most US states
- It doesn’t matter whether you have a job or not, you must carry insurance if you are going to drive on US roads
- Even if you lose your job and your auto insurance rates rise, there are other methods you can use to go around the high premiums
Your employment status cannot affect your ability to purchase insurance. Auto insurance companies don’t care if you are employed or not. As long you don’t lapse on your payments, you remain insured.
However, going from employed to unemployed can increase your auto insurance rates in a number of ways. For instance, some auto providers consider unemployed customers high risk.
Insurance companies use a wide range of factors to calculate premiums. These may include the age of the driver, past convictions, credit records, as well as the job status. The data accumulated by the Association of British Insurers (ABI) shows that unemployment provides additional risk for insurance providers.
So, to protect their bottom line, they can raise premiums for unemployed drivers. When purchasing car insurance, compare quotes from various providers before you can settle for one of them.
Comparison shopping increases your chances of getting better auto insurance rates, and you are only limited by the number of quotes you are willing to compare. Use our free insurance comparison tool above to compare the best rates today.
Does being unemployed affect your car insurance?
Getting by is difficult when you don’t have a job. When you lose your job, you lose access to credit cards and auto loans, as these companies and lenders will only extend their services to people with regular and reliable sources of income. Many people are actually surprised that auto insurance providers don’t do the same. Your employment status doesn’t deny you coverage.
However, despite the fact that being unemployed won’t keep you from obtaining auto insurance, it does affect your rates.
There are many factors that affect how auto insurance rates are determined including age, location, driving history, and credit history, but it all boils down to your risk factor. Somehow, in the eyes of auto insurance providers, being unemployed increases your risk factor. By being a high-risk driver, your insurance policy will increase in price.
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Why Unemployment Increases Auto Insurance Rates
In most cases, losing your job means that you will get higher auto insurance rates when renewing your policy at the end of the year. Here are some of the reasons why some auto insurance providers will increase your rates after losing your job:
Increased Likelihood of Filing A Claim
According to some auto insurance providers, the longer you stay out of work, the higher your chances of making a claim. In addition to that, unemployed people are more likely to file a fraudulent claim.
Inability to Maintain Your Car
Since you are out of a job, the insurance provider assumes that you are strapped for cash and can’t keep up with your things like car maintenance. Being unemployed means less cash to spare, hence no money for car maintenance. If you can’t pay for car maintenance, your car will be more susceptible to damage, which increases your risk factor.
Unemployed people are victims of circumstances. Therefore, these individuals are more likely to be distracted. If you lose your job and have no savings, the chances are that you will be stressed wondering how you will provide for your family for the coming months. These thoughts can distract you while driving thus increasing your chances of getting involved in an accident. While purely situational, insurance companies do take driving habits into consideration.
More Time on the Road
There are arguments both ways for this point. Some will argue that since you are out of a job, you will be driving less as there are no more commutes to and from work. This means less time on the road and a reduced likelihood of getting in an accident.
Others will say that since you are out of a job, you will be spending more time on the road driving to job interviews and back, hence more time on the road that your typical drive to and from work.
In addition to that, you will be driving on less familiar roads which increase the chances getting into an accident. Whether this factor increases or reduces your rates really depends on the insurance company.
Auto insurance providers determine risk factor using their own statistical data, and if you lose your job, your rates are more likely to go up. However, you can always compare quotes from other car insurance companies. If you get better rates, consider switching carriers to find a more affordable auto insurance policy.
Maintaining Your Car Insurance While Unemployed
Just because you are out of a job doesn’t mean you still can’t pay for your car insurance. What you can’t afford is to drive uninsured, because that could damage not only your rates but your driving record if you’re caught. Comparison shopping is the best way to keep your auto insurance rates down. Here are other ways you can reduce the cost of car insurance when you are going through a rough patch financially:
- Limit your mileage – The more time you spend on the road, the higher the chances of getting involved in an accident. Keep your mileage in check.
- Avoid paying in installments – Insurance providers love it when you pay your premium upfront and offer a sizeable discount for it. It may be hard for you to rack up the dough if you just lost your job, but if you can, pay upfront and save a few bucks.
- Install anti-theft devices – Adding anti-theft devices on the vehicle to improve security can reduce your auto insurance rates.
- Add an experienced driver – Adding another driver to your policy can reduce the premium. Just make sure that the person you are adding is an experienced driver.
Utilize All Your Options While Unemployed
The insurance industry is full of options for people in any financial situation. While unemployed and looking for affordable car insurance, keep in mind that you can always talk directly to your current provider and explain the situation first. That way, if they aren’t willing to work with you, you can look elsewhere.
Until you have steady income, consider cutting back in any way possible, while staying safe. Reducing your coverage level, installing safety features in your vehicle, and paying your bills on time if you can spare the finances could help you stay afloat in the long term.
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