Car Insurance For The Unemployed

Obtaining car insurance if you're unemployed can seem intimidating and it may be tempting to cancel your auto insurance policy when you lose your job. However, car insurance is not only is legally required for all drivers in the United States, it's simply a smart thing to have. The good news to cash-strapped unemployed individuals, however, is that most insurers will not charge higher premiums to those who are unemployed.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 6, 2022

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Last Updated: December 3, 2018

Unemployment is a tough thing to face. While your income dries up, your bills keep coming. Even if you lose your job, you still need to pay for food, a place to live, and if you drive – car insurance. Car insurance not only is legally required for all drivers in the United States, it’s simply a smart thing to have. While it’s tempting to cancel your auto insurance when you lose your job, it’s very important that you do not. Below, we’ll present auto insurance options for the unemployed so that you will not need to sacrifice your insurance coverage just to make ends meet.

The Importance of Car Insurance

Almost every household today owns at least one car. With the number of vehicles swarming the roads today, accidents have become a more common occurrence than ever. These accidents can result not only in physical damages and bodily injuries but also expensive liabilities.

Any of the aforementioned, more often than not carry with them quite the price tag. After all, medical bills aren’t cheap. Either is repairing or replacing cars. This is where car insurance comes into play. Its role is to provide the policyholder with financial protection against the damages arising from accidents, thefts, and any other thing that might happen to you on the road.

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Factors That Affect Car Insurance Premiums

Though there are a vast number of companies offering car insurance policies, they all base their premiums on the following factors:

  • Vehicle Classification: manufacturer, model, age, mileage, value, etc
  • Coverage: type, extent, deductibles, etc.
  • Driver: age, gender, marital status, traffic violations, driving record, occupation, employment status, etc.

To view a more comprehensive list of the factors that affect your auto insurance rates, click here.

Why Is Employment Status A Factor?

Your insurance premiums are directly proportional to the risk you pose to insurance companies. The higher the amount of time your car is on the road, the more likely you are to get into a car accident. The amount of time spent on the road depends on the distance that you travel to your workplace.

Your insurance premium would similarly be affected when your occupation status changes to “unemployed”. What’s confusing is that some insurers charge unemployed individuals higher insurance premiums, while other insurers charge unemployed individuals lower insurance premiums.

Why Is This?

From one perspective, the insurer would expect a person without a job to be traveling less; as he or she wouldn’t be required to travel regularly to their workplace. This would mean putting the vehicle and the individual at a lower risk, therefore attracting lower insurance premiums. After all, annual mileage is a large determinant of how much you will be paying for car insurance.

Then there are other insurers, who believe that unemployed clients would be traveling more because:

  1. They would have more free time on their hands and would travel more than an employed (who would typically spend 8+ hours per day at the office).
  2. If they are in-between jobs, they would be spending a lot more time traveling back and forth to job interviews. These job interviews might even be out-of-state or in far away cities.

Either of these situations would mean more time on the road, an increased risk to the car, and a higher mileage. All three of these factors would lead to higher insurance premiums.

The good news to cash-strapped unemployed individuals, however, is that most insurers will not charge higher premiums to those who are unemployed. Like stated above, how much you drive is a big factor in determining your premiums. If your annual mileage decreases, let your insurer know, and your insurance rates will most likely decrease.

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Existing Insurance vs. New Insurance

If you happen to lose your job in the middle of your car insurance policy, it is your duty to inform your insurance company of your “change in circumstance”. The same is true if you happen to find a new job during that time.

Failing to notify your insurance of your loss of unemployment or new employment can void your car insurance policy. If you break the terms of your insurance policy and thus void it, you would not be able to file any claims in the event of an accident, even if you have been paying your premium without fail.

As mentioned above, based on your insurer’s perspective, they may choose to either increase or decrease the premium on your existing policy after your job loss. Rest assured, however, that your insurance policy will not be canceled if you lose your job.

In case the company decides to hike your premiums, you will have the option to switch your insurer, regardless of the scheduled policy renewal time. However, it is also important to note that if you do decide to hunt around for a new car insurance provider while you are unemployed, you won’t necessarily get cheaper rates by switching to a new provider. Like stated above, the way insurance companies view unemployed customers varies by company

Regardless, it’s wise to not lie about your unemployment status when you apply for an insurance quote. Not only can false information invalidate future insurance claims, but it could also be considered insurance fraud.

Lowering Insurance Premiums During Unemployment

The period of unemployment is a tough phase for anybody. The bills don’t stop pouring in, but the money does. However, no matter the extent of the financial crisis or how long you stay unemployed, you should not be tempted to let go of car insurance altogether. There are many reasons for this. Firstly, maintaining minimum auto insurance coverage is required by law. Secondly, in the event of a crash, without insurance and a source of income, an expensive car accident could financially cripple you.

Even if you are unemployed, there are still a bunch of methods you could employ to lower your auto insurance premiums:

  1. Park and drive carefully. Maintain a blemish-free driving history.
  2. Reduce the number of cars you own. Lesser cars equal a lesser premium.
  3. Switch to a car that is cheaper to insure.
  4. Do not modify your car or add any aftermarket parts.
  5. Install a security system or an anti-theft device into your vehicle.
  6. Keep your mileage to a minimum.
  7. Keep all of your insurance policies (auto, renter’s, homeowner’s, etc.) with a single insurance provider.
  8. Lower coverage amounts on your existing policy.
  9. Frequently compare and contrast rates from different companies.

For more ideas, and to view a much longer list of ways to lower your insurance premiums, click here.

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