Mandatory automobile insurance is a requirement in most all states and can affect the poor in different ways. This includes the ability to pay the premium, having enough coverage and driving without any insurance at all. There are many factors that affect the price of automobile insurance but the poor seem to be affected the most.
One way in which mandatory automobile insurance affects the poor is the ability to pay the premium for the policy. Individuals that are at or near the poverty level may not be eligible for all of the discount that are available on an automobile policy. As a result the cost of the premium is higher for these individuals. Another way in which the poor are affected is the use of Credit Scoring to determine the amount of premium being paid. Also, the poor may be more likely to have more traffic violations that can raise the premium significantly. The poor are at a disadvantage when they are required to have insurance on their vehicle because they are the one who can least afford it.
Another way in which requiring mandatory automobile insurance affects the poor is not carrying enough coverage on the policy. One way to save money on a insurance policy is to have lower limits such as collision and liability on a policy. However, many states require a specific coverage called under-insured/uninsured motorists coverage. This is coverage that is provided in the event that another driver involved in an accident is either under-insured or uninsured. Many times the poor may not have enough coverage on a policy and as a result can be under-insured in the event of an accident. One effect this has is to raise the amount of insurance that is paid by everyone else.
Having mandatory automobile insurance doesn’t mean much is the poor are unable to pay for cost of the policy. As a result many poorer people may choose to drive without any insurance. This can have many different consequences. First, it is illegal in most states to drive a vehicle without insurance coverage. Second, the costs of insurance increase when individuals that have no insurance are involved in an accident. The poor are usually unable to pay if they lose after being sued either by an individual or an insurance company to recover costs. There are some states however that have no-fault insurance laws in which a driver submits a claim to their own insurance company.
States have required mandatory automobile insurance for many different reasons. Insurance companies in various states calculate premiums being paid in many different ways. As a result the poor may end up paying more for an insurance policy than others that can easily afford it.