With millions of job losses as a result of the coronavirus pandemic, finding a way to lower expenses has never been more important, especially if you're struggling with a job loss of your own. Auto insurance is a common household expense, but even when you're unemployed, car insurance is legally required for you to be able to drive on the road. What's more, if you have an outstanding loan or lease on your vehicle, your lender or leasing company may also require certain levels of coverage.
In these troubling times, we are here to help you save on insurance by answering your questions and providing money-saving tips, so let's get started.
Do My Car Insurance Rates Go Up When I'm Unemployed?
No, insurers do not charge unemployed people more money or even take employment status into consideration when calculating premiums for auto insurance policies, so unemployed drivers won't be penalized when it comes to their car insurance rates. Insurance companies do not conduct employment verification or require paystubs to root out unemployed drivers.
Typically, car insurance rates depend on factors like the type of vehicle you drive and your ZIP code, age, and driving record. Some states even allow car insurers to look at your credit history and the length of time you've held onto your current policies. Falling behind on your bills could lower your credit score, which in turn could raise your insurance premiums, though this is not the case in all states.
Should I Cancel My Car Insurance?
No, you should not cancel your coverage. If you need to travel to a medical appointment or places like the grocery store, you may still need to drive your car. You are legally required to have active insurance to drive on the road, and if you get into an accident or your car is damaged by storms, you'll be left without coverage when you need it most.
If you lease your car or make loan payments on it, you more than likely must maintain a specified level of insurance, which you can find out from your lender or leasing company. It is important to know these guidelines before you start digging into how you can reduce your auto insurance costs and get cheap car insurance.
Like lenders and leasing companies, insurers don’t like to see lapses in coverage for a driver, and they typically set premiums higher when they see these lapses. That means saving money today could end up costing you down the road after you get back to work.
What Relief Is Available for Unemployed Drivers?
Although there is no such thing as unemployed car insurance, relief is out there, even if you're drawing unemployment benefits. Many automakers and lenders are offering car loan and lease payment programs that can be a big help if you've lost your job. Additionally, car insurance companies are extending grace periods and halting cancellations to help out their customers during the coronavirus pandemic.
Normally, insurers offer short grace periods before terminating coverage, but they realize that these are not ordinary times. If you are unemployed and facing financial hardship, it's important to reach out to your insurance company as soon as possible to see if they can work out a solution or offer some assistance.
How Can I Save Money Now?
While it is certainly helpful to take advantage of the breaks insurance companies, lenders, and leasing companies are offering, there are some things you can do to take control and lower your rates. Cheap car insurance that provides good coverage is always worth seeking out, but when you're unemployed, car insurance at an affordable rate is that much more crucial. Here are some ways you can save money.
Insurance companies calculate auto insurance rates based on risk, so the less risky you are, the cheaper your insurance will usually be. Getting citations for things like speeding, texting behind the wheel, driving under the influence, and reckless driving can raise your premiums. Getting into accidents can also increase the amount you pay for auto insurance. Driving safely, having no claims, and maintaining a clean driving record are great ways to get safe-driving discounts from most insurers.
Along the lines of safe driving, telematics-based insurance is a popular way to save money based on your driving habits. You may have heard of some of these programs. They include Allstate Drivewise, Esurance DriveSense, Liberty Mutual RightTrack, Nationwide SmartRide, Progressive Snapshot, and State Farm Drive Safe & Save.
While some insurers use a cell phone app, most of these programs require you to install an in-car device that tracks certain driving behaviors, such as hard acceleration and braking, sharp turning, and late-night driving. This could be a good idea if your driving is on the tamer side and you're not behind the wheel late at night.
This type of insurance is a good money-saving option if you are a low-risk driver, but it could cost you more if the insurance company detects risky driving behaviors. If you mash the gas pedal, jam on the brakes, or slice through twisty back roads on a regular basis, telematics-based insurance may not be the best choice for you.
Some drivers may take issue with installing a tracking device in their car, so these privacy concerns should be considered before making the switch to telematics.
Speaking of in-car tech, you may also be able to take advantage of insurance discounts for various safety and security features that your car may be equipped with. These include safety features like daytime running lights and electronic stability control as well as anti-theft technology, including car alarms, engine immobilizers, and vehicle recovery systems. These discounts are not available in all states.
Pay-Per-Mile Car Insurance
With many people jobless, furloughed, or working from home, pay-per-mile auto insurance is an increasingly popular way of buying auto insurance. With this type of coverage, your rate largely depends on the number of miles you drive each day. Your monthly premium includes a base rate and a per-mile rate.
If you put only a few miles on your car every year, switching may save you money. That said, if you start putting more miles on your vehicle because you find a new job that is farther away, for example, switching to pay-per-mile car insurance could come back to bite you.
To learn more, check out What Is Pay-Per-Mile Auto Insurance?
Decreasing Annual Mileage
If switching over to a new type of insurance sounds too drastic for you, consider calling your insurance company and reporting lower annual mileage. In addition to factors like your credit score, location, and vehicle type, insurance companies set the price of your policy based on your annual mileage. Updating your mileage and reporting a lower number could save you money on your insurance bill. Of course, you'll want to let your insurance company know when your mileage increases again, and keep in mind that your premiums will likely be more expensive when you raise your annual mileage again.
Lowering Coverage and Raising Deductibles
Having the insurance you need is important, which is why many states, lenders, and leasing companies require certain levels of coverage. That said, lowering your coverage makes sense in some situations.
If you've had the same coverage since you bought your vehicle, it may be worth taking another look, especially if the value of your car has dropped significantly. Liability insurance is required in most states, but other types of insurance, such as comprehensive and collision insurance, may not be. Together, these three types of insurance make up full coverage car insurance. While this is the most complete coverage on the market, it's also the costliest. If the amount you would save by downgrading is enough to cover the cost of replacing the vehicle, you may not need the extra insurance. That said, make sure you still meet the legal guidelines for your state, and if you have a loan or lease on the car, you'll want to carry the minimums they require.
Raising your deductibles is another policy adjustment that could lower your insurance costs. When you make a claim, the deductible is the amount you must pay before your insurer pays out the rest of the claim. Deductibles apply to comprehensive, collision, and uninsured motorist coverage, where applicable.
Deductibles can be as low as zero with some insurance companies, but decreasing the deductible usually drives up premiums. Raising your deductibles usually lowers your premiums, but it also increases the amount you will pay in the event you make a claim. Keep in mind that raising your deductible now could end up costing you more down the road if you can't afford to pay your deductible and can't access the coverage you need.
To learn more, read our guide on how much car insurance you need.
Occupational and Group Discounts
Furloughed employees and employed spouses can take advantage of discounts available to people in certain occupations. Medical professional, first responder, and teacher discounts are common, but discounts are also available for a few other professionals, including pilots, accountants, engineers, architects, and scientists. Veterans and active duty military can take advantage of discounts from companies like State Farm, Progressive, Nationwide, Geico, and Farmers.
Even unemployed drivers can take advantage of some discounts. Defensive driving courses are available in some states, and taking one could lower your rates. Also, if you're in school, your good grades could earn you a discount on your policy premiums. It's worth checking with your insurer to see if they offer these discounts.
You can also get a group rate through an affiliation like AARP and AAA. Many of these rates can be combined with other policy discounts. That said, you give up a bit of control with group rates, both in terms of coverage options and the company that insures you. You'll want to weigh the cost differences as well as the pros and cons of using a group rate.
Bundle Insurance Policies
Many auto insurance companies offer bundling discounts in an attempt to sell other insurance products. Let's say you already have a homeowner's or renter's insurance policy, for example. You may be able to get a discount on both your auto insurance policy and your homeowner's or renter's insurance simply by bundling them together with the same company. You can also bundle personal property insurance and life insurance. You typically get a discount with each policy you bundle, so the more policies you bundle together, the higher the potential savings.
How You Pay
While you're on the phone with your insurance provider, it may be a good idea to talk about how you're going to pay your bill. Many insurers offer discounts based on how you pay. By setting up autopay, for example, you allow your car insurance company to use a payment method you select to automatically deduct the amount due on your bill.
Another way to save money is to pay your bill in full upfront. While this may not sound like something you would want to do when you're out of work, paying upfront can reduce the amount you pay over the course of the policy. That could mean more money in your pocket over the long term.
Maintain Good Credit
It can be challenging to pay the bills when you're drawing unemployment benefits or have no income, but maintaining a good credit score is important. Not only does it help determine your creditworthiness, but in some states, insurance companies use it to determine your auto insurance rates.
Saving money by not paying your bills now could end up costing you a lot more down the road with more expensive insurance premiums, higher interest rates, and limited borrowing ability. That's why it's important to cover your mortgage or rent payments, monthly car loan costs, and credit card minimum payments. If you can't make them, look into relief programs available to borrowers. While it's easier said than done in some cases, the goal here is to stay afloat when it comes to your credit.
Calling competing insurance providers for free quotes could lead to another potential money-saving option: switching insurance companies. Even now, insurance companies are competing with one another, and many are offering reduced premiums and potential discounts to earn your business.
Shopping around for another insurance policy may end up saving you money, but before you make the switch, you'll want to compare the new policy you are considering with the old one to make sure you're getting the coverage you need. Finding a cheaper policy may be good for your pocketbook now, but it could end up costing you more down the road if you make a claim and find out you don't have the coverage you need.
As we noted earlier, many lenders and leasing companies have guidelines that require specified coverage levels until the end of the contract. You'll also want to keep this in mind when comparing affordable car insurance rates.
Don't forget to let your current car insurance company know that you've found a better rate, as they may come back with a more competitive one.
More Car Insurance Buying Tools From U.S. News & World Report
We know that shopping around for car insurance is probably not something you want to spend a lot of time doing. Doing your research can save you serious money, however, both when you buy the insurance and when you make a claim. U.S. News & World Report has the resources you need to navigate today's auto insurance world. Our car insurance hub will lead you to articles on how car insurance works, coverages you need, car insurance discounts you might qualify for, and the country’s best car insurance companies. We even help you navigate the world of the coronavirus and car insurance.
The Best Car Insurance Companies in 2020
Our Car Insurance Ranking
The Cheapest Car Insurance Companies in 2020
Average Annual Rates:
- USAA: $885
- Geico: $1,168
- State Farm: $1,234
- Travelers: $1,267
- Progressive: $1,373
- American Family: $1,391
- Farmers: $1,682
- Nationwide: $1,864
- Allstate: $1,880