When your income changes, every bill gets a closer look, and car insurance is no exception. It is a large, regular expense, and it can feel like an obvious place to cut. The difficulty is that driving without insurance is illegal in nearly every state, and the consequences of a lapse can be far more expensive than the premium you were trying to save.
This article is for anyone who is between jobs, working reduced hours or simply watching the budget more closely. It covers what to avoid, what to try and who to talk to.
Do not let your policy lapse
A lapse means a gap in your coverage, even a short one. In most states insurers and the DMV share information, so a gap can lead to fines, a suspended registration or even a suspended license, depending on where you live. Some states also require a special filing, called an SR-22, for drivers who have been caught without insurance, and that usually raises premiums for several years.
Even without penalties, a gap can cost you money later. Many insurers give lower prices to drivers with continuous coverage, and a break can push quotes up when you return. If money is tight, speak to your insurer or compare other options before you stop paying.
Talk to your insurer first
Many people assume the insurer will not help. In practice, a phone call often turns up options you did not know about. You can ask about moving your due date to line up with when you get paid, switching to a different payment plan, or reviewing your policy for savings. Most insurers also have a grace period after a missed payment and must send written notice before cancelling, although the timing differs by state. Understand your deadlines so a missed date does not become a lapse.
Ways to manage the cost
- Compare quotes, because prices vary widely between companies. A change of insurer is often the single largest saving.
- Ask about monthly payment plans that fit your budget, and what fees they carry.
- If you drive less, tell your insurer about the lower mileage. A shorter or no commute can lower the price.
- Review your coverage, but always keep your state’s minimum liability limits.
- Remove extras you do not use, such as duplicate roadside assistance if your credit card or another plan already provides it.
- Ask about discounts you may already qualify for, such as low mileage, safe driver or bundling.
- Ask about telematics programs if you are a careful driver who now drives less.
Does being unemployed change your price?
It depends on where you live and which insurer you ask. In many states, occupation or employment status can be one of the factors an insurer uses to set a price, and some states restrict it. California, for example, has limited the factors insurers can use. Because of this, it is worth getting more than one quote, and answering honestly when you are asked about your work situation. Do not give false information to get a lower price, since a misstatement can lead to a denied claim.
Look for state assistance
A few states run programs designed to help lower-income drivers. California’s Low Cost Automobile Insurance Program, for instance, offers reduced-price liability insurance to eligible drivers with a good driving record. New Jersey has a special policy for certain people receiving public assistance. Eligibility rules are strict and the programs are not available everywhere, so check with your state’s department of insurance to see what exists where you live.
Think carefully about higher deductibles
A higher deductible can lower your premium, but only choose one you could afford to pay if you had a claim during a period of reduced income. If you do not have savings to cover a $1,000 deductible, then picking it to save a few dollars a month leaves you exposed. A lower deductible and a slightly higher premium may be the safer choice.
If you are not driving at all
If the car will be sitting for months, perhaps because you have moved in with family or no longer need a commute, you may be able to reduce coverage rather than cancel it. Some insurers allow a comprehensive-only policy that covers theft, fire and weather while the car is parked. Rules differ, and some states still require liability if the car is registered. Ask your insurer, and read our guide to parked car insurance. Never cancel completely without checking the effect on your registration and your coverage history.
A practical checklist
- Find your policy renewal date and your next payment date.
- Call your insurer and ask what savings or payment options are available.
- Get at least two other quotes with the same coverage.
- Check your state’s insurance department for assistance programs.
- Keep proof of insurance current and in the car.
Learn more in our guide to car insurance for unemployed drivers or compare quotes to see your options.
This article is for general information only and is not insurance, legal or financial advice. Coverage, rules and prices vary by insurer and state.