Report: Lower-Income Families Are Paying More For Car Insurance
1 year ago
Education, income, credit history play part in how much insurers charge people
A new report by the Consumer Federation of America has found that lower income families are paying more for car insurance. Which in turn is why so many of our cousins are "riding dirty."
Their findings say while car insurance companies are not legally allowed to ask how much money someone makes, they do use factors like education level, living situation and credit history to determine rates. Often times resulting in people who don't make as much, paying even more. The study also revealed that homeowners usually pay less than people who do not own homes.
The disparity in rates, they believe, prevent many poor people who actually want to do better from buying cars because the insurance is too high.
"There is much academic research that clearly shows that if you have ready access to a car, it dramatically improves your economic opportunities,” says CFA executive director Stephen Brobeck. "...The big problem is that mandatory coverage is so expensive, often costing over $1,000 in urban areas that it prevents them from buying a car."
The authors of the the study suggest that insurers base their rates on how far and often a person drives. They also suggested lowering the minimum amount of liability insurance that lower-income households are mandated to buy.
"Some companies charge more for the basic limits for the state than they would for higher limits for the exact same driver,” says co-author of the study J. Robert Hunter. “It’s like going into a store and saying, ‘I want a box of cereal,’ and the big box is much cheaper than the little box.”