Expensive auto insurance for low income people is derailing the financial situation of many low-income families. At an annual income of about $21,000, paying $500 a year towards auto insurance, even with a clean driving record, can be difficult. This is precisely the case with majority of low income families in the US, reports Consumer Federation of America.
Even the five big insurance companies, namely: Allstate, Farmers, GEICO, Progressive, and State Farm have no provision for affordable car insurance for low income families. They do not offer basic insurance coverage costing less than $500 a year for safe drivers in more than one third of country’s areas tagged as low-income areas. This, in part, explains why a large number of low-income drivers tend to drive without any insurance, explains Tom Feltner, the principal author of this report and director of financial services at CFA.
For the report, the CFA team studied 81,000 low income auto insurance quotes across zip codes in 50 urban areas. They compared minimum coverage with the median annual household incomes lower than $41,638. Most drivers from lowest income zip codes were reported to earn below $21,000 annually. Of the 50 regions, about half had at least one low income zip code where the insurance companies charged annual premiums above $500. Detroit, Orlando, and Baltimore were among the nine areas where the costs of car insurance low income families were in excess of $500 in all the lower income zip codes. Clearly, drivers of these areas do not have access to affordable car insurance for low income even when their driving records are clean.
Robert Hartwig, president, Insurance Information Institute suggests that auto insurance costs of auto insurance for low income people, like all others, are determined considering factors such as car usage, place where the car is parked, credit history and so on. He adds that insurance in urban areas is more expensive due to increased risks of theft, accidents, and repair costs. Therefore, insurers offer prices which are reflective of the risks of the area.
Considering the plight of low income families, California has devised a program that allows low-income, safe drivers to buy minimum liability coverage at annual costs ranging between $226 and $338. This affordable car insurance for low income is available to drivers with annual income of $55,000 or lesser, with a car worth $20,000 or lower, and clean driving record for at-least three years.