Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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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

UPDATED: Sep 27, 2020

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Key takeaways...

  • Insurance companies use several different rating factors to assess risk and set car insurance rates
  • One of the rating factors that can have an indirect affect on your rates is your employment status
  • Insurance companies do not often run reports on your employment status when you’re buying car insurance
  • Sometimes, insurance carriers will give occupation discounts to professionals who statistically drive safer
  • Auto carriers do check the status of your license and the status of your credit report when approving an application

Your employment status can have a direct effect on the way that you live your life. If you want to buy and finance a new car, one of the first things that the finance company will want to know is whether or not you’re employed.

Without a regular source of income, you’re not going to find any reputation car loan lender that’s going to extend you an offer for financing.

Not only does your employment status affect your creditworthiness, it can also affect your insurance rates.

Insurance companies must use a long list of different risk factors to fully assess whether or not the company should do business with an applicant.

While being unemployed doesn’t make you ineligible for coverage, it’s possible that your employment status could affect your rates.

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Table of Contents

Can a company deny you coverage because you don’t have a stable job?

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Insurance companies can deny their applicants the option to buy auto insurance if they don’t meet certain requirements. These requirements are usually focused on:

  • Driving Records
  • License Status
  • Accident History
  • Vehicle Ownership

Some factors just change premiums and others completely disqualify an applicant from applying.

State departments are in charge of overseeing transactions in the auto insurance marketplace. The state will set restrictions saying what can and can’t be used to turn a client away.

When a carrier is restricted from turning someone away for a specific reason, the reason is believed to be discriminatory. No insurer can ever be turned away because of what they do for a living or because they aren’t employed.

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Why is turning someone away for their employment status discriminatory?

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A lot of the factors that are used to rate your policy might seem discriminatory in nature.

After all, many people don’t agree with the practice of using age and gender to set rates but it’s still a common practice that’s allowed almost everywhere. The practice is justified because the statistics show trends in accident rates for both demographic factors.

It doesn’t work the same way when you look at employment status. It doesn’t quite seem fair that someone could turn a vehicle owner away when they want to buy insurance if they don’t have a current job.

They could be:

  • A college student
  • An entrepreneur
  • A caretaker
  • A stay-at-home mom
  • Disabled
  • Retired

Everyone’s situation is different.

There are no trends in accident records that say that full-time employees, part-time employees, and unemployed drivers all have different habits that lead to more or fewer accidents.

Since there’s no effect on a person’s risk class, state departments have determined that turning people away because of employment status should be prohibited.

Your Employment Status Can Still Affect Your Rates

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If you disclose that you’re employed, that fact alone won’t make your rates different from someone who’s not employed.

Whether you work and where you work, however, do have an effect on your premiums. This is why you can argue that whether or not you work can indirectly affect your car insurance rates.

Your Premiums Can Change When You Commute

One of the rating factors that can change when you’re employed is your usage. Usage is a term that’s used to describe driving habits and how the vehicle is driven on a regular basis.

There are three different classifications that can be used: pleasure, commute, or business.

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Anyone who is unemployed or works from home can rate their vehicle as a pleasure vehicle. Drivers who take public transportation or carpool can also rate their vehicles as pleasure usage even when the driver has a full-time job. Pleasure usage is the cheapest option.

When you select commute, it actually raises your rates. Self-employed drivers or business professionals who go to multiple sites pay the highest rates as business users.

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Your Premiums Can Change When Your Mileage Changes

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Another factor that can change when your employment status changes is your annual mileage. Typically, when someone commutes to work they drive more miles each year than someone who doesn’t.

If a change in your employment changes how much you’ll be estimated to drive each year, you should update your policy by letting your agent know.

Credit Scores Can Change When Employment Changes

Insurance companies may be able to run credit-based insurance scores to set rates. Running a credit score shows if someone is creditworthy and if they are less likely to file a claim.

When your employment status changes, it could affect whether or not you can pay your bills on time.

When you miss payments, your credit score goes down and this, in turn, lowers your insurance score. Be aware of this as you approach your renewal.

Some Carriers Do Give Occupational Discounts

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It can be helpful if you tell the insurer what you do for a living.

Not all carriers give their drivers discounts for their occupation but some do.

If you are a nurse, a teacher, an insurance agent, or you fall into another occupation where professionals in the group have fewer losses, you could get an occupational discount.

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Insurance Companies Can’t Run Employment Status Checks

Insurance agents hardly ever take your word without verifying the information that you provide. Your driving record is verified, your insurance history is verified, and your accident history is verified because there are electronic reports that can easily be run.

The same doesn’t go for your employment records.

The only people who have access to your employment status records are professionals who work for the IRS.

The carrier could dig up information online, but they don’t take the time to check and see if the employment information that you give is true because it doesn’t have an effect on risk.

Always be honest on your insurance application. If you ever file a claim, the carrier will look into the information that you provided to see if you were dishonest about your employment status.

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