Does Car Insurance Cost More If I am Unemployed?

Employment status isn’t something vehicle insurers check and consider for premium calculations so being unemployed doesn’t affect auto insurance rates. Drivers don’t get charged higher premiums for their line of work and certainly companies cannot refuse coverage based on your job description. As long as you can manage your finances well with your savings until you find a job and keep up with your premiums, you shouldn’t see any effects of unemployment on premiums. You may actually start saving some money on car insurance if you take a few steps to make sure you get the best rates possible.

Some jobs like doctors, teachers and nurses can qualify people for discounts and some companies may offer slightly better rates based on job description. But that isn’t the same as charging more for your employment status or job title. If you had one of the jobs that qualified you for discounts, you may have to give up the discount if you aren’t currently practicing the job.

According to the Insurance Information Institute, policyholders don’t have to inform their car insurance companies when they lose or quit their jobs. Therefore, there should not be any changes to your premiums as long as the situation does not lead to other problems.

However, long term unemployment can affect people’s financial position and that indirectly influences their risk profile when it comes to insuring automobiles. When the money is tight, people would stop maintaining their vehicles properly or get it done cheaply with not original parts. This can lead to more accidents due to vehicle failure like worn brake pads not stopping the car in time.

And they are more likely to make a claim because they don’t have the money to pay for even small damages or they like to preserve what they have. Car insurance companies don’t charge people higher rates because they are unemployed but they have another tool to detect the issues with money and charge higher rates and that is credit score. Many consumer advocates argue that taking credit score into account when calculating auto insurance premiums is a way of charging more for poorer drivers.

However, unemployment is often a temporary position and many families either have enough savings to tie them over until they find a new job or they can get by with one wage. So, unemployment doesn’t necessarily become a problem in the short term and may not really affect credit scores.

Missing premium payments is a more imminent danger for automobile insurance increases, especially if it leads to policy lapses. Companies can apply surcharges for missing payments and irregularities. Again, this doesn’t necessarily happen. As long as they keep their premium payments and maintain their current credit scores, unemployed people don’t need to worry about paying higher vehicle insurance for their employment status.

Ways to Reduce Car Insurance for Unemployed Motorists

Understandably, people may like to be proactive and bring their premiums down in such cases. Then it is best to do it early on the unemployment since you never know how long it would take to get back to employment. Here are some of the tips that can save you money on auto insurance in the meantime.

1) Switching to usage-based policies can be very helpful because you aren’t commuting anymore and that will show on your mileage.

2) Pleasure only auto insurance is another option because it is usually cheaper. If you aren’t commuting anymore, there is no reason why you should be charged extra because car insurance companies take the commute into account when they calculate premiums.

3) Shopping around and switching can be a good solution. People don’t even get a single alternative quote and just auto-renew when everything is going great and they have no money concerns. If you haven’t shopped around for a while, you are statistically more likely to save around 20% on vehicle insurance just for getting a few quotes, comparing them and finding the best deal. Unemployed motorists can still seek for the best rates and get insured with some of the most well-known companies like State Farm, GEICO, Progressive, Nationwide, Liberty Mutual and Allstate

4) Increasing deductibles to reduce premiums is a tricky proposition but if you believe you are a good driver and unlikely to have an accident, you may enjoy the savings by doing so. Just be aware that increased deductibles mean higher out of pocket payment if you have a claim.

5) Going over coverage is another good idea to make sure there isn’t anything you shouldn’t be paying for. It may be a good idea to drop things like Rental Car Reimbursement if you have a good public transport system in your town or you have another car you can use if you need to.

So people can even do more and get rid of the second car they hardly ever use or sell the sports car and buy a family sedan instead for the time being and make the savings go further. The truth is that people are often cavalier with their spending when they enjoy a good salary and ignore many savings. By looking more closely and taking advantage of saving opportunities, unemployed people can actually lower their auto insurance premiums.