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Low Income Car Insurance Works Well in California


Every state has established a minimum legal requirement for car insurance that must be met by every person who drives in that state, regardless of the person's income. California has recently started a low-income insurance program that offers extremely low rates to people who can't afford to purchase the legally required insurance through a standard agency.

The program is picking up momentum in California and the outlook is remarkably good. Drivers who would have been limited to public transportation or forced to drive without insurance are able to travel legally in their own vehicles as they try to work their way out of their low-income situations. The California model's success could indicate that other states would benefit from the same type of program.

Rates Continue to Rise as Economy Struggles

Car insurance rates across the nation have been rising by an average of 11% per year for the last five years. Unfortunately, the American economy has been battling a deep recession over that same period. Record numbers of people have lost their jobs due to the recession, and many of them are settling for lower wages just to get by. Car insurance can seem like a luxury that does not fit into a tight budget when you are scraping to pay your regular utility bills.

Low Income Drivers Have Few Choices

Even though it is illegal to drive without insurance, many low income drivers are beginning to make that choice more often so that they can still get to work every day. Very few cities have the public transportation infrastructure to allow a person without a car to get to work easily. If someone is searching for a job, public transportation schedules could slow him or her down considerably. Even though it is a serious risk, uninsured drivers are driving anyway in the hopes that they will find the right job and make enough money to cover insurance costs eventually.

Consequences of Driving Without Insurance

The consequences of choosing to drive without insurance can be far more severe than the cost of paying for a high annual premium. In many states, uninsured drivers can have their licenses suspended or lose their cars when caught. If an uninsured driver is involved in an accident, he or she becomes personally liable for the cost, faces steep court costs and may even see jail time. California decided to implement their low-income insurance program because uninsured drivers cost the state time, money, and labor as police officers and courts have to manage the problems related to these accidents. The low-income insurance program helps keep low-income drivers out of trouble and allows the state employees to work on cases that are more important.

How the California System Works

Drivers who are California residents and have good driving records can apply for the low-income insurance program. Qualified applicants must be at least 19 years old without any accidents that involved injury or death within the past three years. Applicants must drive a vehicle that is valued at less than $20,000, and they must have held a valid driver's license for the last three consecutive years. The drivers must also meet the program's low-income requirements before consideration for the program. Once a driver qualifies, he or she will be allowed to purchase a basic car insurance policy through an agent for as little as $400 annually.

Driving History Makes a Difference

Even with the California low-income insurance program, a driver's history is important. Drivers with more than one point on their driving records will not qualify for the program. California also stipulates that drivers must maintain their good driving record in order to continue receiving the program's low rates.

Drivers who pose a higher risk for being involved in an accident may not qualify for the low income insurance rates. This limitation of the low-income program protects insurance companies from taking on high-risk drivers at minimum rates, but it could also keep many low-income drivers with just one blemish from being able to take advantage of the program. The high-risk drivers will continue to drive without insurance, which dampens the benefits of the program.

Specialty Agencies for Low Income Individuals

California's new program may be working well, but it is only helping a small fraction of the nation's low income drivers. Residents of other states who cannot afford to purchase insurance from standard agencies still need to find options for driving legally. There are agencies designed to offer only the standard legal minimum insurance for lower rates than a normal insurance agency can offer. These specialty agencies can afford to lower their rates because they do not have to pay for claims on collision or comprehensive policies.

Other Options for Affordable Car Insurance

Every large city is home to hundreds of smaller insurance agencies. These agencies can be far less expensive because they do not spend as much of their overhead purchasing television advertising campaigns or paying for multiple branches throughout the nation.

The Internet also offers a source of affordable insurance policies. Because insurance quote websites are accessible to more people, the competition is stiff, driving down insurance rates. Quote websites have access to many insurance companies, some of which consumers may not even know about. Those who have trouble meeting the costs of a minimum insurance policy through a well-known national insurer may have a better chance finding a policy that is priced lower through an online quote.

Low Income Program Relatively New

California has been using the low-income car insurance program for a short period. The initial results seem to indicate that the program is working successfully, but there has not been enough time to tabulate all of the data regarding the difference the program has made. Other states may be waiting to see how the program works over a matter of years before they begin to consider creating their own low-income programs. Since the California program does not use tax dollars to operate, other states may move more quickly than expected in a continuously struggling economy.