Minimum Wage, Maximum Car Insurance Pain

By Features CarInsurance.com

If you earn the minimum wage, chances are you've bought the cheapest car insurance you could find.

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Depending on where you live, just enough liability insurance to be legal can cost anywhere from $342 to $1,544. At $7.25 an hour, that is at least a week's pay -- and in some places, more than a month's pay.

Minimum-wage workers tend to be young. Half of them are under 25, according to the U.S. Department of Labor.  We priced basic state-minimum auto insurance quotes from coast to coast for a 24-year-old male with no tickets and good credit. We put him behind the wheel of a 1997 Ford Taurus worth perhaps $2,500.

Yet even this vehicle -- or any similar no-frills ride-- represents a huge expense for the 4 million or so Americans working a minimum-wage job.

In Springfield, Ill., he would have to work 55 hours at that state's $8.25  minimum wage to pay a year's worth of the state's minimum liability coverage on his beater car. In Denver, 97 hours.

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And in Albany, N.Y., Trenton, N.J., or Hartford, Conn., he would have to work more than a month of minimum-wage hours to buy the lowest amount of car insurance required.

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CarInsurance.com looked at bare-minimum policies for a young driver in each state's capital. Unless you're 24, male, a resident of the particular addresses we used and proud owner of a 1997 Taurus, your quotes probably won't match ours, which are only a snapshot of the rates available through our quote-comparison engine.

They are, however, a good indicator of the financial hurdle confronting any young driver who depends on his own car to commute to school or work.

What a 24-year-old pays for state-minimum liability

State State minimum Annual cost Minimum wage Hours
Alabama 25/50/25 $668 $7.25 92
Alaska* 50/100/25 N/A $7.75 NA
Arizona 15/30/10 $542 $7.80 69
Arkansas 25/50/25 $874 $6.25 140
California 15/30/5 $592 $8.00 74
Colorado 25/50/15 $756 $7.78 97
Connecticut 20/40/10 $1,388 $8.25 168
Delaware 15/30/10 $778 $7.25 107
District of Columbia 25/50/10 $1,422 $8.25 172
Florida 10/10 $582 $7.79 75
Georgia 25/50/25 $784 $5.15 152
Hawaii 20/40/10 $492 $7.25 68
Idaho 25/50/15 $568 $7.25 78
Illinois 20/40/15 $452 $8.25 55
Indiana 25/50/10 $428 $7.25 59
Iowa 20/40/15 $410 $7.25 57
Kansas 25/50/10 $518 $7.25 71
Kentucky 25/50/10 $890 $7.25 123
Louisiana 15/30/25 $976 $7.25 135
Maine 50/100/25 $622 $7.50 83
Maryland* 30/60/15 N/A $7.25 NA
Massachusetts* 20/40/5 N/A $8.00 NA
Michigan 20/40/10 $1,216 $7.40 164
Minnesota 30/60/10 $1,180 $6.15 191
Mississippi 25/50/25 $486 $7.25 67
Missouri 25/50/10 $480 $7.35 65
Montana 25/50/10 $526 $7.80 67
Nebraska 25/50/25 $602 $7.25 83
Nevada 15/30/10 $494 $8.25 60
New Hampshire+ None $466 $7.25 64
New Jersey 15/30/5 $1,230 $7.25 170
New Mexico 25/50/10 $544 $7.50 73
New York 25/50/10 $1,544 $7.25 213
North Carolina 30/60/25 $462 $7.25 64
North Dakota 25/50/25 $668 $7.25 92
Ohio 12.5/25/7.5 $470 $7.85 60
Oklahoma 25/50/25 $782 $7.25 108
Oregon 25/50/20 $994 $8.95 111
Pennsylvania 15/30/5 $532 $7.25 73
Rhode Island* 25/50/25 N/A $7.75 NA
South Carolina 25/50/25 $748 $7.25 103
South Dakota 25/50/25 $422 $7.25 58
Tennessee 25/50/15 $466 $7.25 64
Texas 30/60/25 $630 $7.25 87
Utah 25/65/15 $880 $7.25 121
Vermont 25/50/10 $512 $8.60 60
Virginia 25/50/20 $628 $7.25 87
Washington 25/50/10 $546 $9.19 59
West Virginia 20/40/10 $1,052 $7.25 145
Wisconsin 50/100/15 $342 $7.25 47
Wyoming 25/50/20 $422 $5.15 82

* Data missing or unavailable at time of publication

+ New Hampshire drivers must show proof of financial responsibility in the event of an accident

 No shortcuts: It's the law

The federal minimum wage is $7.25 an hour, though many states set their own higher and a few go as low as $5.15.

Keeping even an old beater on the road anywhere will consume a large amount of that bare-bones income. Gasoline is a big expense, but ultimately a controllable one:  You can walk, take the bus, combine your trips, or carpool.

But no one will split the cost of your insurance policy, which as a car owner you are legally required to buy in every state except New Hampshire (and even in New Hampshire, most people buy insurance).  States set their own levels of acceptable coverage. Maine and Alaska demand the most: $50,000 to cover the injuries of anyone you might hit ($100,000 total for any single accident), and $25,000 to cover the damage to other cars you cause.

There are very few trade-offs available to save money.

For example, you can't reduce your limits below these minimum amounts. Mostly these state-mandated policies have coverage limits that are very low anyway -- the $10,000 property damage limit required in many states wouldn't come close to replacing a newer-model car.

And you can't raise your deductible. There are no deductibles on liability insurance.

What you can do

The cost of liability insurance has more to do with the driver than the car. (The insurance company isn't going to fix your car, just the person's you hit.) In your search for affordable auto insurance, these are the factors you have some control over:

  • Your driving record: More than one violation or accident is going to hurt.
  • Your credit: If it's dismal, you're seen as a bigger risk of a claim and thus charged more in many states. (See "The double-whammy of bad credit.")
  • Your mileage: The less you drive,  the less risk of your hitting someone. (See "Plug in, drive less, save more.")
  • Your insurance history: If you've let your policy lapse, even for a few days, you'll pay about 5% more than you would have otherwise, according to Insurance.com.
  • Your insurance company: No two insurers offer identical rates, and even on state-minimum policies,  premiums can differ by hundreds of dollars a year.

Insurers do look at your car, and if it has a significantly higher rate of claims than most (because, say, it's driven mostly by young drivers), your liability rates will reflect that risk.

The original article can be found at CarInsurance.com:
This is as cheap as car insurance gets