Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Aug 5, 2021

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Key takeaways...

  • If you’re a low-income driver and own a vehicle, you’re still required to buy at least mandatory insurance
  • Insurers use credit-based insurance scores to set your rates, but your income can’t be used when setting the score
  • Standard insurance companies don’t offer any special premiums to people who are in a low-income bracket
  • Some states have special auto insurance programs in place for low-income drivers who can’t afford standard insurance
  • Be careful when you buy coverage based on price and always compare insurers to choose a good and fair carrier

Managing your finances when you’re living paycheck to paycheck can be tough.

Just because you have a challenging full-time job and you work very hard to provide for your family doesn’t mean that you’ll make enough to live comfortably. You may have just enough to cover your living expenses with little left over to cover other bills.

What’s considered low-income in one area might not be low-income in another.

Your economic status is defined by the region you live in, the cost of living in that region, your employment status, and your income.

If you fall into the low-income bracket, it can make it difficult to coverage your auto insurance. You need a car to get to and from work, but you also need mandatory insurance to drive legally.

Here’s what you need to know about insurance for low-income families.

Before that, if you’d like to go ahead and save on auto insurance rates, start comparison shopping today by entering your ZIP code above!

All Registered Vehicle Owners Must Carry Mandatory Insurance


Every state has its own set of mandatory auto insurance requirements. Limits that must be carried on your insurance policy will vary.

Some states require extremely low limits of liability and others require higher third-party limits and even some first-party protection. No matter what’s required, it’s always the registered owner who’s expected to comply.

Since it’s the legal owner’s job to comply with compulsory insurance laws, it’s the legal owner who will pay the price when the law is violated.

The state doesn’t care if you overlooked a bill because of a medical emergency or you couldn’t pay your premiums because you were short of money, even low-income drivers are held accountable for obeying the law.

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Why is auto insurance required even when you don’t plan to use it?


Insurance is one of those few things that you pay for in life that you don’t want to use. It’s equivalent to buying disability insurance or a warranty. Having it when you need it is nice but you have to have a loss or a breakdown so that you can file a claim.

You might not plan on using your auto insurance, but you never know what can happen when you’re driving on the open road.

You can drive to and from work going the speed limit and looking out for reckless drivers but that doesn’t mean you’re never going to get into an accident. Accidents happen, and they are called accidents because you can’t predict when they will occur.

You could tell the state you have no intentions of having an accident, but that’s still not going to alleviate you of the burden of paying for auto insurance.

Insurance requirements became popular because of all of the damage that can happen in an accident.

Since there’s no way to ensure that all drivers have enough money to pay for their negligence out of their own accounts, the only way to protect drivers is to require insurance.

What type of insurance required?


You should check to see what coverage you have to buy as you’re shopping around for auto insurance designed for low-income families.

Not a single guide will be able to tell you what you’ll have to buy. You need to refer to your state guidelines first.

All but 12 states in the U.S. have a tort law in place. The rest have no-fault laws that complicate things.

After you find the requirements for your state specifically, you should find out what the benefits under the mandatory coverage will pay for if and when you need to file a claim.

It’s good to know what you’re paying for and how you’re protected by the coverage that you’d prefer not to have to buy.

Here’s how common mandatory coverage options work:

  • Bodily Injury Liability  pays for third-party expenses for medical treatment or for funeral costs when someone is injured in an at-fault accident
  • Property Damage Liability  pays for third-party car repairs and other property replacement if you damage anything in an at-fault auto accident
  • Personal Injury Protection  in no-fault states, drivers must carry this coverage to pay for their own medical treatment and rehabilitation costs after any auto accident

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How much does it cost to buy a basic policy?

A basic insurance policy is one that includes the bare minimum coverage. It will satisfy the requirements, but it doesn’t afford you much protection if you’re in a serious accident.

For those who are already struggling to pay insurance premiums, buying a basic policy is a better option than going without insurance.

There’s no way to tell you how much you’ll pay for insurance unless you get a quote. Quotes are estimates that use your personal information to calculate your rate.

You may need a personal rate quote to find out what basic coverage will cost you, but data shows that the average American pays $518.49 per year for basic liability coverage.

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Do you have to purchase more than the minimums?


Policyholders who pay the average premium will be paying just over $43 per month. If you think that you can manage that premium, you should check to see if you’re required to purchase additional coverage.

Basic coverage satisfies state law, but it doesn’t meet the requirements outlined in an auto loan contract.

If your car is financed, you’ll have to worry about paying more for your coverage. Lending agreements say that you have to carry comprehensive and collision on your policy at all times to protect the property.

When the car is paid off, the physical damage coverage can be removed. Since collision is one of the more expensive coverage options, it will drive your rates up.

What happens if your finance company finds out you don’t have coverage?


Just paying for your car coverage isn’t enough to keep your lender happy. If you’re paying your loan installments on time, you’re affording extra fees that you really can’t afford to pay.

It’s just as important to have full coverage at all times. You’re living on a low income, and you might think some insurance is better than no insurance, but not to the lender.

If you remove full coverage from your policy or your coverage cancels for any other reason, the insurer will notify your finance company.

The carrier knows to notify the lender because they are listed as a loss payee. Adding lenders as loss payees is a contractual requirement as well.

Once the lender finds out, premiums for lender-placed insurance will be added to the balance of your loan, therefore increasing your payments and extending your loan period.

If you’re trying to get rid of a bill quickly so that you have more money to live off of, this isn’t the way to do it.

What factors can affect your auto insurance rates?


It’s not just the coverage that you carry that increases your premiums; it’s also some of your personal rating factors.

Full coverage will always cost you more than basic coverage, but how much you’ll pay for certain options and limits is totally dependent on your personal rating factors.

All of the personal rating factors that insurance companies use to decide how much to charge you have an impact on risk.

Sometimes, your habits make you less of a claims risk than a majority of drivers and other times they make you a higher risk. The higher the risk, the more you’ll pay.

Here are most of the main rating factors:

  • Age, gender, and marital status
  • Licensing status and domestic driving experience
  • Vehicle year, make, model, and body style
  • Aftermarket features and safety features in the vehicle
  • Occupation or student status
  • Vehicle usage (pleasure, commute, or business)
  • Garaging territory (where vehicles are parked overnight)
  • Annual mileage and driver assignment for each car
  • Claims record for each driver in the household
  • Moving violations for each driver in the household
  • Credit-based insurance score for the named insured

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Can carriers use your income when factoring your insurance rates?

Your occupation may qualify you for special discounts, but you’ll notice that your income is nowhere on the list of personal rating factors.

Income can’t be considered when quoting coverage or when accessing a person’s credit-based insurance score.

Credit-based insurance scores are based on your credit rating, but they don’t use every detail that’s found on an Experian report or Transunion report. Insurers will pay for different insurance score reports that are run by companies like LexisNexis.

LexisNexis runs personal reports and gathers data that carriers can use. Everything that’s considered discriminatory is weeded out. One of the factors that can’t be used when scoring a person’s credit file for insurance purposes is income.

Luckily, being a low-income family won’t work against you here but having defaults or a poor credit history could.

What happens when you don’t have insurance?


If you’re not complying with your lender’s requirements, you’ll have to pay more every month to avoid late payments and repossession. The penalties assessed by the state for failing to carry insurance at all are even worse.

If you’re caught driving without insurance or the DMV finds out your coverage cancels, you’ll have to deal with these consequences:

  • Your registration will be suspended until you can show you have insurance
  • You’ll have to pay a reinstatement fee
  • Your license can be suspended for multiple offenses
  • You could be ordered to appear in court
  • You could be sentenced to up to 1 year in jail
  • Your car could be impounded for up to 30 days
  • You could be assessed a fine for your conviction

Look For Discounts First


As you can see, it’s much more expensive not to carry insurance. Just one fee could pay for your premiums for an entire term.

If you want to be smart and budget-conscious consumers shopping with a low income, you need to look for all of the discounts that you qualify for. Here are common auto discounts:

  • Occupational Discount
  • Pay-in-full Discount
  • Good Student Discounts
  • Student Away at School
  • Accident-free and Good Driver Discount
  • Good Credit
  • Homeowner Discount
  • Low Mileage Discount
  • Multi-car or Multi-line Discounts

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What if you can’t afford a standard policy?


You have the right to buy insurance. If you can’t find a policy or you can’t afford the standard premiums, check to see if your state have a government-sponsored program for low-income families.

You must be income-eligible and have a good record to qualify. There are restrictions as to how much coverage you can buy.

Living off of a low income is difficult, but there are ways to prioritize your bills and keep the important ones low. Buy what’s required and get as many discounts as you can.

Start by getting instant online auto insurance quotes and then see if you need government-sponsored coverage for low-income families.

Before making any final decisions on your insurance company, it is important to learn as much as you can about your local insurance providers, and the coverages they offer. Call your local insurance agent to clear up any questions that you might have. Questions to consider asking include, “What is the best coverage plan for me/my family/my situation?” “What are the minimum coverage requirements in my state and what form of coverage do you recommend?” “Do you guys offer any bundle discounts if I take out both my auto insurance and home insurance with you?” and “What is the average rate of insurance quotes you guys offer?”

Before making any big insurance decisions, use our free tool to compare insurance quotes near you. It’s simple, just plug in your zip code and we’ll do the rest!

Try our FREE online quote tool and start comparison shopping today for more affordable auto insurance rates! Enter your ZIP code below to get started!


  1. https://www.iii.org/issue-update/compulsory-auto-uninsured-motorists
  2. https://www.naic.org/cipr_topics/topic_credit_based_insurance_score.htm
  3. https://www.insurance.ca.gov/01-consumers/105-type/95-guides/01-auto/lca/
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  11. https://www.iii.org/fact-statistic/auto-insurance
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  13. https://www.consumer.ftc.gov/articles/0056-understanding-vehicle-financing
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  16. https://www.huffingtonpost.com/laura-adams/how-age-gender-and-marital-status-affect-your-car-insurance_b_6973360.html
  17. https://www.aiadc.org/File%20Library/Member%20Center/Search%20Content/File%20Upload/Public%20Affairs/2005/July/Credit-Based%20Insurance%20Scores%20Consumer%20Brochure-290558.pdf
  18. https://www.consumerfed.org/pdfs/140310_penaltiesfordrivingwithoutautoinsurance_cfa.pdf
  19. https://www.foxbusiness.com/features/2013/07/01/auto-insurance-discounts-not-to-be-missed.html
  20. https://www.cbpp.org/archives/11-8-01wel.htm