Why Auto Insurers Charge The Unemployed Higher Rates Than The Employed

Did you know that unemployment may raise your auto insurance rates? There are several factors that make auto insurers quote higher rates if you are unemployed. Here are several factors and assumptions why this may happen:

You Use Your Car More

One of the assumptions is that you are likely to use your car more if you are unemployed than if you are working. You will be driving from place to place looking for work and attending interviews, among other things. The more you are behind the wheel, the more likely that you may be involved in a mishap; hence the raised rates.

You Are Likely to Make a Claim

Motorists don't always make claims, especially small ones if their cars get damaged. After all, you wouldn't want to make too many claims since that may raise your rates when renewing your coverage. However, if you are out of work, then you may be tempted to make a claim for every dent that occurs, and your insurer knows this.

You are Battling Stress

The stress of unemployment can affect your alertness on the road. It's not easy to stay alert and focused on your driving if you are wondering if you will raise the overdue rent by the end of the week or whether you have hit the limits on all your credit cards. It may also be difficult to avoid taking calls while driving if you suspect they concern prospective jobs.  

Your Car is Likely to Poorly Maintained

It may also be difficult to keep your car in a top-notch condition if you are unemployed and short on cash. It's possible that you will just focus on bigger or more serious car problems and let the smaller ones slide. After all, it may not be difficult to choose between fixing your car and making mortgage payments, especially if the car is still moving.

The Unemployment May Affect Your Credit Score

Lastly, your unemployment status may also impact your credit score, especially if you have been out of work for a long time. For example, you may find yourself defaulting on loans or settling your bills late, both of which affect your credit-based insurance score. In effect, your insurance rates may rise.

Hopefully, you will soon be employed and won't have to worry about these things. In the meantime, be proactive and takes steps to mitigate the effect of your unemployment status on your insurance. For example, stay on top of your finances to minimize the effect on your credit score, drive carefully to reduce road mishaps (and hopefully the number of claims you make), and prove your low mileage to your insurer. 

If you have questions about insurance, talk to a place like Axiom Insurance Agency.