A new study by the Consumer Federation of America found that America’s poor are being overcharged for their auto insurance. These findings apply to 40 percent of Americans with annual incomes below $40,000. The CFA says they were legitimately surprised by how badly auto insurance companies treated their low-income clientele.
How Much More Do The Poor Pay For Auto Insurance?
Each state has its own minimum liability coverage law, but there are many other factors that can drive up a person’s auto insurance costs, including type of vehicle driven, age, and driving record. Unfortunately, many safe drivers who have no accident record and who drive very few miles are being charged hefty rates. Take, for instance, a 30-year-old executive (with a perfect driving record and 20-mile daily commute) living in an exclusive St. Louis suburb whose auto insurance rate is only $558 per year. A poorer person with the same perfect driving record and habits could end up paying $2,095 a year for the same level of coverage!
- He’d pay $60 more if he needed to pay installments, instead of lump sum.
- He’d pay $71 more if he only has a high school diploma, rather than a college education.
- He’d pay $84 if he had been unemployed at some point this year.
- He’d pay $337 more if there was a time when he didn’t have a car.
- He’d pay $347 more if he lived in a lower-income zip code.
- He’d pay $638 more if he suffered a period of being uninsured for whatever reason.
Worse yet, states like Arizona, Texas and Arkansas charge drivers higher premiums for selecting the minimum state coverage levels, rather than the higher liability coverage wealthier drivers can afford!
What We Can Do
The CFA has suggested several necessary reforms, such as:
- Lowering the minimum liability requirements and the rates associated with them
- Establishing a low-income auto insurance program
- Including other risk factors — like miles driven — which might lower rates for low-income motorists
However, the best thing that you can do is to shop for better auto insurance rates through our free quote system!