Enter your ZIP code:

State Auto Insurance Becoming Available

Low-income drivers on both coasts can now get discount auto insurance with low auto insurance rates directly from the insurance department of the state they live in—as long as that state is New Jersey or California.

Affordable, state-sponsored discount auto insurance could be good news for low-income drivers in the 45 states with stringent mandatory insurance rules. A federal program for making just such assistance available—the Auto Choice Reform Act—has been discussed since 1998. At the time these discussions began, the National Association of Independent Insurers (NAII) initiated a study to determine the impact of state-sponsored, discount auto insurance on the lives of low-income citizens.

The study found that, in 1991, U.S. households spent 2 percent of their overall annual income on car insurance. However low-income residents in Maricopa County, Arizona, spent up to 30 percent of their annual income on auto insurance. They had to have reliable private transportation to their jobs—as do most Americans—and often paid for car insurance while jeopardizing other necessary purchases. This study found that 44.1 percent of respondents could not buy food at least once because that money had to be spent on car insurance.

In response to this information, California legislators made extension of the state’s mandatory insurance law contingent on developing a state-sponsored, affordable insurance program. Naturally, legislators expected it would be wildly popular, but for a number of reasons, experience has shown that only 4,000 drivers had taken advantage of it by 2003.

Among those reasons are:

  • A tough financial eligibility rule which must be met
  • Cost which was still too high—at approximately a dollar a day
  • Lack of medical coverage as incentive for the policyholder (as in California, where only passengers are covered)

Eligibility requirements and price were adjusted in 2003 so that more drivers would qualify. The program now requires a policyholder’s annual income to be no more than 250 percent of the federal poverty level, or about $38,000 for a family of three. (The standard had originally been 150 percent.)

Liability coverage, at $10,000 for bodily injury per person, is lower than the state’s minimum liability limits for private coverage; however, insurance industry data show 90 percent of bodily injury claims are for less than $10,000.

The New Jersey plan, which was available for the first time in 2003, is slightly more extensive, paying up to $15,000 of most medical expenses due to an accident, and providing coverage for catastrophic injuries, such as severe brain damage, up to $250,000. Eligibility is based on standards for Medicaid.

Acceptance of these policies by low-income drivers could be good news for all drivers in the states which offer them. These policies eliminate the hassle that occurs in accidents with uninsured motorists. This should make them attractive to the insurance industry as well as drivers. They would also relieve an enormous amount of stress on low-income working families with high auto insurance rates—and any stress-reduction in U.S. society, particularly on the roads, is a good thing.

Is there a downside for the insurance industry or for individual drivers?

Not really, although the California program was begun partially in response to lobbying by insurance companies that wanted to impose a surcharge on drivers for temporarily dropping coverage or having been previously uninsured. California’s legislators found that idea punitive and counterproductive. But some states, Maryland for example, continue with very costly automatic uninsured driver coverage, and without an elective plan to cover those who have trouble paying market-priced insurance bills. (Maryland’s coverage kicks in the second a driver’s insurance lapses, regardless of the reason for the non-payment—forgetfulness, bank error, and/or poverty are equally penalized under the law.)

A survey for the California Department of Insurance said the poor want to comply with mandatory auto insurance laws. It suggests developing a product that clearly and directly benefits the poor and is “affordable, such as an under-$300 policy that provides medical benefits and lost wage coverage.”

That’s a small step for California…but a huge leap for states like Maryland and 42 more that have yet to consider organizing discount auto insurance assistance for low-income drivers.

List of Articles
No. Subject Author Views
85 Rental Car Insurance: Do You Really Need It? youcomparequotes 17719
84 Auto Insurance: The Secret Weapon for Saving at the Pump youcomparequotes 18043
83 Getting the Cheapest Car Insurance in Your State youcomparequotes 16993
82 Play It Safe for Cheap Truck Insurance Rates youcomparequotes 17537
81 How to Get Discount Auto Insurance youcomparequotes 17796
80 Insurance for Van Lovers youcomparequotes 17542
79 Car Insurance That Fits Your Needs youcomparequotes 17195
78 Online Car Insurance Quotes in 5 Easy Steps youcomparequotes 17382
77 Getting Insured with an Online Auto Insurance Quote youcomparequotes 18400
76 Home and Auto Insurance: Sure-Fire Protection in Unsure Times youcomparequotes 17197
75 How to Keep Teen Car Insurance Quotes at Bay youcomparequotes 19438
74 Choosing Cheap Online Car Insurance That Fits Your Life youcomparequotes 17783
73 Auto Insurance from InsureMe youcomparequotes 17698
72 Car Insurance Comparisons Save You Time & Hassle youcomparequotes 18064
71 Car Insurance Companies & InsureMe Save You Money youcomparequotes 18454
70 Buying and Insuring a New Car youcomparequotes 16816
69 Compare Auto Insurance Rates youcomparequotes 17144
68 Safety Measures Lower Auto Insurance Quotes youcomparequotes 16650
67 Getting Car Insurance Quotes, from Beginning to End youcomparequotes 16743
66 The Car Insurance Quote & Ratings Factors youcomparequotes 17202
65 What's Behind Your Auto Insurance Quotes? youcomparequotes 17312
64 How Cheap Car Insurance Can Save You Money youcomparequotes 16659
63 How to Reduce Car Insurance Prices youcomparequotes 17190
62 Getting Insured with Free Car Insurance Quotes youcomparequotes 17383
61 Auto Owners Insurance & Costly Driving Mistakes youcomparequotes 16699
60 Auto Insurance Cost & Your Ride youcomparequotes 17195
59 How No Fault Auto Insurance Works--or Doesn't youcomparequotes 16971
58 How to Get the Cheapest Car Insurance youcomparequotes 16879
57 Selecting a Car Insurance Company youcomparequotes 17578
56 Finding New Car Insurance Following Cancellation or Nonrenewal youcomparequotes 17187
55 Get the Best Car Insurance Rates Around youcomparequotes 17428
54 Factors That Affect Your Car Insurance Quotes youcomparequotes 16465
53 Child Safety Belts Keep Kids Safe youcomparequotes 17131
52 Speeding and Car Insurance Rates youcomparequotes 16857
51 Not At Fault Car Insurance & Accidents youcomparequotes 16970
» State Auto Insurance Becoming Available youcomparequotes 17458
49 Auto Insurance Gap Narrowed by Insurance youcomparequotes 17709
48 Car Insurance & Roommates or Family Members youcomparequotes 17282
47 PIP and No-Fault Auto Insurance Reform youcomparequotes 16980
46 PIP and No-Fault Auto Insurance Reform youcomparequotes 16884
45 SUVs: Minor Collision, Major Damage youcomparequotes 17435
44 Severe Weather Driving Tips youcomparequotes 17212
43 Avoiding Aggressive Drivers youcomparequotes 18074
42 Safety Tips & Car Insurance for Teens youcomparequotes 17128
41 Insurance for Cars: It's Your Choice youcomparequotes 17085
40 Car Insurance Quotes Save You Money youcomparequotes 17147
39 Finding & Comparing Auto Insurance Specialists youcomparequotes 18022
38 Safety Features Save Lives & Money youcomparequotes 16908
37 Curbing Auto Insurance Prices youcomparequotes 16449
36 Teen Auto Insurance youcomparequotes 16733
35 Car Insurance: Your Questions Answered youcomparequotes 16785
34 How to Buy Car Insurance youcomparequotes 17421
33 Vehicle Insurance: Covering Any Kind of Car youcomparequotes 16700
32 Truck Insurance for Your Pride & Joy youcomparequotes 16488
31 How Insuring a Used Car Can Save You Money youcomparequotes 17516
30 All-in-One Policies Insure Car & Home Together youcomparequotes 17338
29 Credit Scores & Car Insurance youcomparequotes 17929
28 Classic Car Insurance Protects Your Relic Ride youcomparequotes 16949
27 Reducing SUV Insurance Rates youcomparequotes 16871
26 Good Driver Car Insurance Rewards Safe Driving youcomparequotes 17388
25 How to File an Auto Insurance Claim youcomparequotes 17026
24 Avoiding Deer Collisions While Driving youcomparequotes 17493
23 Cheap Auto Insurance through Safe Driving youcomparequotes 16849
22 Auto Insurance Basics That Save youcomparequotes 17250
21 It's Official - Men Are Terrible Drivers youcomparequotes 18754
20 Car Insurance Quote Saves Money and Stretches Income youcomparequotes 17502
19 Auto Insurance Quote Heavily Dependent on Driver Behavior youcomparequotes 17026
18 Car Insurance Quotes Separate Fact from Fiction youcomparequotes 17286
17 How What You Drive Affects Your Auto Insurance Quotes youcomparequotes 17059
16 Cheaper Car Insurance in 8 Easy Steps youcomparequotes 17410
15 Save Hundreds on Your Car Insurance Without Switching to Geico youcomparequotes 16899
14 Your Options in Motorcycle Insurance youcomparequotes 16876
13 The Advantages of RV Insurance youcomparequotes 17248
12 Enjoying the Classics: How to Insure Your Old Relic youcomparequotes 34755
11 Insuring Your Teen Driver youcomparequotes 17021
10 The SR22 & Car Insurance youcomparequotes 16504
9 Auto Insurance & Generic Parts youcomparequotes 17212
8 A Trip Gone Wrong: Summer Breakdown on the Road youcomparequotes 18347
7 Drowsy Drivers, Wake Up! youcomparequotes 16511
6 Cheap Car Insurance Protection You Deserve youcomparequotes 17888
5 Top 8 Safety Picks for Car Insurance Discounts youcomparequotes 17317
4 Drivers: 7 Important Facts about Texting That Could Save Your Life youcomparequotes 21414
3 Buckles: Use Them for Safety, Not for Show youcomparequotes 16818
2 Auto Insurance Quotes youcomparequotes 17281
1 Why You Should Give Thanks -- And Stay Home This Year youcomparequotes 17564
XE Login