Does Income Affect Car Insurance Rates?

While income does not directly affect your car insurance rates, factors associated with being a low-income driver may inadvertently result in higher premium costs. However, by shopping around for better rates, utilizing available discounts and maintaining a safe driving record, you may be able to lower your rates and make coverage more affordable.

Read on to learn more about the ways income can inadvertently affect your insurance rates, along with tips on how to still get affordable coverage.

On This Page

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  How Does Your Income Impact Car Insurance Rates?

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  What Factors Might Count Against Lower-Income Drivers?

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  Will My Car Insurance Rates Be Higher if I Make More Money?

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  What Do Insurers Look for When Setting Car Insurance Rates?

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  Car Insurance Tips for Low-Income Drivers

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  How To Save Money on Car Insurance

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  FAQs

How Does Your Income Impact Car Insurance Rates?

Car insurance companies typically do not consider income directly when determining your auto rates.^[1] Instead, they focus on other factors to determine your risk of making a claim. However, your income may indirectly affect factors that are considered when underwriting your monthly premium.

Does Your Credit Score Affect Car Insurance Rates?

Your credit score may affect your car insurance rates, as insurers often use your score to assess risk. Rather than using your credit score directly — which is often used when determining interest rates or whether you meet loan qualifications — most insurance companies utilize credit-based insurance scores when factoring rates. These scores focus only on factors like payment history and how long you’ve had credit established to determine your odds of making a claim, while ignoring factors like your occupation, income, gender and other pieces of personal information.^[2]

Currently, five states ban the use of credit scores when helping to determine auto rates, including California, Hawaii, Maryland, Massachusetts and Michigan.^[3]

Additionally, both Oregon and Utah prohibit insurance companies from using credit scores to cancel a policy or refuse coverage renewal, although they may still use them when underwriting a new policy.^[3]

What Additional Factors Might Affect Your Car Insurance Rates?

Other factors that may affect your insurance rates include:^[4]

• Your driving history, such as how many at-fault accidents or traffic violations you have had. Typically, only the prior three to five years of your driving record are considered when determining rates.^[5]
• How much you drive your car.
• Marital status.
• Your ZIP code.
• Your age.
• Your gender
• The type of car you drive.
• The types of auto insurance coverages you have.
• Your coverage amount.
• Your deductible.

Some states ban certain factors from being used when determining rates. For example, using ZIP codes as a factor is banned in California and Michigan, while using age as a factor is banned in Hawaii and Massachusetts.^[4]

What Factors Might Count Against Lower-Income Drivers?

Although income is not a direct factor when determining your insurance rates, other realities faced by lower-income drivers may lead to higher premiums, even if you’re a safe driver with a clean driving record. Some of these factors may include:^[6]

• Renting instead of owning a home, as this may indicate lower stability and higher risk.
• Not having a higher level education, which many may not be able to afford.
• Working a blue-collar job instead of a white-collar job, which may require education and high-level work qualifications more difficult for lower-income individuals to obtain. Additionally, jobs with higher commutes due to limited job flexibility could increase your annual mileage, which can also result in higher rates.
• Living in an area with higher accident rates or where car vandalism and theft are more frequent, as it may be cost-prohibitive for lower-income people to move elsewhere.^[4]
• Having a low credit score, which could indicate lower financial responsibility and a higher likelihood of filing a claim, according to insurers.
• Driving an older or less expensive car without advanced safety features, which may increase the likelihood of an accident or theft and lead to higher rates.

Will My Car Insurance Rates Be Higher if I Make More Money?

Generally, your income does not affect your car insurance rates directly, even if you earn more than the average U.S. salary. However, a higher income may allow you to use strategies that can help lower your rates. For example:

• Higher sources of income may allow you to raise your deductible more comfortably, since you may be better able to afford out-of-pocket costs if you need to file a claim.
• Purchasing your car instead of leasing it could eliminate the need to carry collision and comprehensive coverage required by a lender.
• Greater access to education could help you qualify for jobs that insurers view more favorably, as well as provide greater flexibility when searching for employment.
• A higher income may allow you to more easily move to a ZIP code that insurers consider lower risk.
• Higher spending capacity may make it easier to improve your credit score over time.
• Being able to afford a safer vehicle may help lower your insurance rates due to improved safety features and theft deterrents.

What Do Insurers Look for When Setting Car Insurance Rates?

Insurance companies evaluate how likely you are to file a claim when determining your auto insurance rates. Generally, the higher your risk of filing a claim, the higher your premiums may be.

Car Insurance Tips for Low-Income Drivers

Below are a few tips for low-income drivers that may help make car insurance more affordable:

• Drive safely, avoiding rushing or making risky driving maneuvers that could lead to an accident.
• Improve your credit score by paying down outstanding debt and lowering your credit utilization.
• Choose a vehicle with strong safety features, opting for as many as you can afford and one with a high safety rating. Check with different insurers to gauge how much specific cars may cost to insure.
• Consider bundling your auto and renters or homeowners insurance to reduce costs.
• Limit how much you drive, which could help you qualify for low-mileage discounts and reduce the risk of an accident.
• Raise your deductible to lower your monthly premium. However, ensure the deductible is an amount you can reasonably afford to pay if you need to file a claim.
• Lower your coverage amounts, especially if you drive an older vehicle and already meet your state’s minimum coverage requirements. Generally, if your car is worth less than 10 times your premium, the coverage may not be worthwhile.^[7]
• Look into low-income car insurance programs, as some states — including California, New Jersey, Hawaii and Maryland — offer programs for drivers who cannot afford private car insurance and meet state-specific requirements.^{[8][9][10][11]}

How To Save Money on Car Insurance

In addition to the tips above, one of the best ways to find affordable car insurance is to shop around and compare quotes from different insurance companies. Try to gather quotes from three and five insurers to compare premium costs, available discounts and coverage options. You’ll typically need to provide information about your vehicle, driving habits and other personal details to each insurer individually when requesting quotes, which can make the process time-consuming and frustrating.

You can help speed up the process by using an insurance marketplace like SmartFinancial. After answering a brief questionnaire, we’ll connect you with a licensed insurance agent who can help you explore coverage options that fit your needs and budget. Click here for free auto insurance quotes today!