Low-Income Car Insurance: How To Get It

Here's how to find affordable auto insurance policies, even with a low income

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Carrying valid auto insurance is a legal requirement in 49 states in the U.S. However, just because auto insurance is mandated doesn’t make it affordable, especially for those with low to moderate incomes. A AAA study found that the average cost of full-coverage insurance for a 2019 small sedan in 2019 was $1,328, though of course your rate will vary depending on your vehicle, driving record, credit score, and other factors. Finding an auto insurance policy that doesn’t put a burden on your budget may take some work. 

Here’s what you need to know about finding affordable auto insurance on a low income.

How Income Affects Car Insurance Rates

According to a 2016 report by the Consumer Federation of America (CFA), many insurers charge moderate-income drivers with spotless records more than they charge higher-income drivers who have recently caused accidents.

 “Insurers will never ask you about your income, but they do look at proxies for income, such as your ZIP code, job title, education, marital status, and home ownership,” Douglas Heller, an insurance expert with the CFA, told The Balance in a phone interview.

Why do insurers use such metrics, even though they do not predict driving behavior?

“There’s not an actuarial reason for pricing based upon these factors, but a marketing one. Wealthier consumers buy more insurance products, and since auto insurance is mandatory in almost all states, it’s an ‘in’ to any consumer in America,” Heller said.

Fortunately, a few states offer government-sponsored car insurance to help keep low-income drivers affordably insured.

States That Offer Low-Income Car Insurance


California’s Low Cost Auto Insurance Program, or CLCA, offers premiums ranging from $244 to $966, depending on which county you live in. (In 2017, the average cost of car insurance in California was $957.08, according to the Insurance Information Institute.) To be eligible for CLCA, you must meet the following requirements:

  • Have a valid California driver’s license
  • Own a car worth less than $25,000
  • Have a good driving record
  • Be at least 16 years of age
  • Meet the income requirements, which range from $31,900 for a single-person household to $76,700 for a five-person household

CLCA’s basic policy provides $10,000 bodily injury/death protection per person, $20,000 bodily injury/death protection per accident, and $3,000 property damage liability protection per accident. Optional medical payments coverage and uninsured motorist coverage are also available.

CLCA does not offer comprehensive or collision coverage.

Drivers can apply by filling out the eligibility questionnaire.

New Jersey

New Jersey’s Special Auto Insurance Policy (SAIP) provides low-cost, limited auto insurance to residents eligible for federal Medicaid with hospitalization. This policy costs $365 per year (or $360 if you pay your premiums all at once) and covers emergency injury treatment after car accidents and severe brain and spinal cord injuries up to $250,000. The policy also offers a $10,000 death benefit for car accident fatalities. 

The insurance does not cover property damage, either yours or another person’s. The program only covers one car per policy.

To apply, search for a New Jersey SAIP provider near you, or call 1-800-652-2471.


The Aloha State offers free, no-fault financial insurance to some low-income Hawaii residents who qualify for financial assistance through one of the state benefit programs: Temporary Assistance to Needy Families With Dependent Children, Assistance to the Aged, Blind, and Disabled (AABD), and the General Assistance program. Each program has different eligibility requirements. In addition to meeting those requirements, you must be receiving Supplemental Security Income (SSI) or financial assistance in order to qualify for the free, no-fault insurance.

To apply for this insurance, call the Hawaii Department of Human Services at 1-808-586-4993 and ask an eligible employee about how to qualify for free car insurance.

Other Ways To Lower Your Premiums

For drivers outside of these states, there are several ways to reduce your annual auto insurance premium.

Shop Around

“Shopping around is vital, even though it’s not enough to solve the problem,” Heller said. That’s because you can find what Heller described as “wildly different premiums” from one insurer to the next, just based on which factors each insurer focuses on during the underwriting process.

Usage-Based Insurance

With usage-based insurance, the insurer monitors your driving via a device installed in the car or through a mobile app. With such a monitor in place, the insurer can know to the decimal how many miles you drive. Lower mileage is correlated with lower risk of accident and fewer auto insurance claims.

“Insurance companies tell us very little about what they’re monitoring in addition to mileage,” Heller said. “They are gathering more data than that. They tell us they are looking at things like hard braking and the number of left turns a driver makes, but insurers are secretive about their specific algorithms.”

If you are uncomfortable with an insurer monitoring your driving, usage-based insurance may not be right for you.

Maintain Coverage With No Gaps

According to Heller, a coverage gap is one of the biggest predictors of higher premiums.

“A break in coverage leads to more expensive premiums once you reinstate coverage,” he said. “It’s better to reduce coverage rather than canceling it.”

Heller said to inform your insurer if you are driving fewer miles, which often goes along with a change in financial circumstances.

“The default mileage for most insurers is 12,000 to 14,000 miles,” Heller said. “If you’re driving less than that because you were laid off or retired, you may be able to get a mileage-based discount.”

If you have an older car, you may also consider reducing comprehensive and collision coverage. However, Heller said that this kind of decision should be made “thoughtfully and with expert advice.” Being underinsured can turn out to be more costly than paying for the coverage you need.

Tips for Saving Money on Car Insurance

If you’re still looking for ways to reduce your auto insurance rate, consider these other tips and tricks:

  • Insurers commonly offer discounts to consumers who bundle policies, such as home and auto.
  • Work to improve your credit score.
  • Sign up for an organization to get an additional discount, such as AAA.

Defensive driving courses are often touted as a good way to lower your premium, too, but they may not work for everyone. “[They] will probably not make a relative difference if you live in a high-premium ZIP code,” Heller said.

Keeping Your Auto Insurance Affordable

Heller believes that the changes to make auto insurance affordable for lower-income drivers must come from the industry itself—but he sees reason for hope.

“The broader societal reflection on systemic bias that we’re currently experiencing will raise these concerns to a new level,” he said.

Until such changes occur, drivers looking for low-income car insurance have several options available to them for affordable coverage. Finding the right low-cost option may take a little research and some behavioral changes, but it can provide you with affordable peace of mind.

Article Sources

  1. Insurance Information Institute. "Automobile Financial Responsibility Laws By State."

  2. AAA. "Your Driving Costs: How Much Are You Really Paying to Drive?"

  3. Consumer Federation of America. "Major Insurers Charge Moderate-Income Customers With Perfect Driving Records More Than High-Income Customers With Recent Accidents."

  4. Insurance Information Institute. "Facts + Statistics: Auto insurance."

  5. California's Low Cost Auto Insurance. "FAQ."

  6. State of New Jersey Department of Banking and Insurance. "Special Automobile Insurance Policy (SAIP)."

  7. Hawaii Department of Human Services Benefit, Employment, and Support Services. "Hawaii Financial and SNAP Benefits Rights and Responsibilities."