Does Losing Your Job Affect Your Car Insurance?

While your employment status alone usually doesn’t change your car insurance rate, the loss of a job can affect your policy in other ways.

It’s important to keep your car insurance in force even after you’ve lost your job because a lapse in coverage can lead to higher premiums, fewer insurance options, and financial risk if you get into an accident.

Your occupation doesn’t directly affect your car insurance rates. That said, some states collect employment information, which they may use in their rating plans. 

But even when insurers consider your employment status, unemployment is only one of many rating factors. Driving history, mileage, vehicle type, and coverage choices can also affect your car insurance costs, so your job status is a minor issue at best.

Note: If you get a car insurance discount through an employer-sponsored affinity program, you could lose the discount due to the loss of your employment.

Some monthly expenses are fixed, but car insurance may be an area where you can cut costs if you lose your job. 

By making strategic changes, you may be able to reduce your car insurance premium without sacrificing necessary coverage. 

Update mileage

Lower mileage can mean lower rates. Many car insurance companies view drivers who don’t commute as a lower risk than those who drive to and from work every day.

You may qualify for a lower rate by updating your mileage from a commuter car insurance policy to a pleasure-use rate. 

Ask about discounts

Each insurance company offers its own discounts. Contact your agent or company to review that you’re receiving all the discounts you are eligible for. 

Here are some common discounts to consider:

Adjust payment

Insurance companies commonly reward their customers based on payment arrangements. You may save some money by paying for the full premium upfront rather than in monthly payments. 

Your company may also have a program that offers a discount for signing up for electronic funds transfer (EFT) instead of paying by check or credit card. 

Enrolling in an auto-pay program can also carry a discount with some carriers.

Enroll in a usage-based program

Car insurance companies don’t offer temporary insurance for the unemployed, but they may be able to help you out by enrolling you in a usage-based program. Usage-based programs charge you based on how much you drive.

With a pay-per-mile program, you pay a fixed monthly rate, plus a few cents per mile. This is ideal if your commute has temporarily disappeared.

Some carriers also offer micropayment options, which allow you to purchase coverage in smaller, more manageable blocks of time.

Review coverage options

When funds are tight, reviewing your current policy helps you identify where you might be overpaying and where you can safely adjust your coverage.

Follow these steps to optimize your coverage:

1. Evaluate each vehicle’s value: If you drive an older vehicle, it may be worth removing collision or comprehensive coverage and sticking to liability only. 

2. Raise your deductibles: Opting for a higher deductible on collision and comprehensive coverage will generally lower your monthly premium. Just ensure you can afford the out-of-pocket cost if you need to file a claim.

3. Remove any extras: Consider dropping optional add-ons like roadside assistance, rental car reimbursement, custom parts coverage, glass waivers, or new car replacement.

The NAIC points out that you agree to accept more risk when reducing your coverage, so be cautious about reducing or removing it.¹

If you’re shopping for new coverage, use Luva. You can compare quotes from multiple carriers side by side and find coverage that fits.

Maintain a clean record

To avoid a sharp increase in your premium, do your best to maintain a clean driving record. By driving cautiously and taking simple precautions, like parking further away from other vehicles or avoiding high-hazard areas, you can significantly lower your risk of filing a claim.

If you do receive a ticket, you aren’t out of options. In many states, you can contest a traffic ticket or take a defensive driving course to help keep your record clean. 

Shop around

Car insurance rates can change at each renewal, so it's worth comparing quotes periodically. You may find that you can get the same or better coverage for a lower rate with a different company.

The Insurance Information Institute (III) recommends getting at least three quotes when shopping around.² Walk through your options with Luva and compare real quotes from carriers in a few minutes.

If you decide to switch carriers, be sure to activate your new policy before canceling your current one to keep your car insurance continuously in force. 

Pausing your car insurance entirely usually isn’t an option. State laws typically mandate that you carry at least a minimum level of liability coverage to legally drive. However, in many states, you can suspend your coverage if the vehicle is strictly not being driven, just be sure to reactivate it before taking it back on the road.

If you have more than one car on your policy, you can ask your insurer about storage coverage. This allows you to drop liability and collision coverage on vehicles you’re not driving, leaving only comprehensive coverage for non-collision claims, such as fire, theft, and vandalism.

The goal is to find the sweet spot between cutting costs and maintaining necessary coverage.

Many car insurance companies offer a grace period, which extends the time you have to make your payment before your policy is canceled. Grace periods commonly range from seven to 30 days, though they vary by carrier. 

Be careful not to allow your policy to lapse for nonpayment. A lapse can cost significantly more than keeping your current policy in force, because insurers often charge higher rates after a coverage gap.