Government-Sponsored Auto Insurance Plans And How to Qualify Author:    Posted under: Auto InsuranceAuto Insurance questions answeredAuto Insurance RatesAuto Insurance Types

Drivers are mandated by law to secure auto insurance before hitting the road and many comply. But for those who are cash-strapped, especially during these difficult times, obtaining a policy through private insurance companies is a near-impossibility.

A study performed by the National Association of Independent Insurers found that low income households spent more than 30% of their annual wages on car insurance, forgoing food on more than one occasion.

There is a great need for affordable insurance, be it health, life or auto. And fortunately, the government is stepping up, albeit little by little, to alleviate this need with regards to car insurance. Lawmakers and advocate groups have begun doing everything they can to scale down the number of uninsured drivers.

California legislators responded to this need by offering a state-sponsored and reasonably-priced insurance program. Lawmakers predicted consumers would take to it extremely well, but data showed that only 4,000 drivers took advantage of it by 2003. The reasons for this have been cited as being the tough financial eligibility rule, cost that was still too high (at $1 a day) and lack of medical coverage for the policyholder (in California, only the passengers are covered).

The eligibility requirements and cost were adjusted in 2003 so that more drivers would be able to qualify for the program. The policyholder’s annual income has to be no more than 250% of the federal poverty level from the original which was 150%, be no less than 19 years of age, with a car valued at no more than $20,000 and must possess a good driving record. Applicants must earn no more than $26,000 to be qualified for this auto insurance program. The low cost auto insurance policy provides coverage at a maximum of $10,000 for one person and $20,000 for all people injured in an accident.

Although the liability coverage, at $10,000 for bodily injury per person, is lower than the state’s minimum liability limits for private coverage, insurance industry data show that 90% of bodily injury claims are for less than $10,000.

In New Jersey, state-sponsored auto insurance plans were made available for the first time in 2003. The plan is slightly more extensive, the basic policy covering up to $15,000 in personal injury protection, $10,000 in bodily injury liability, $5,000 in property damage liability and $250,000 in medical payments. Eligibility is based on standards for Medicaid.

These state-sponsored auto insurance policies could mean good news to low-income drivers in the states which offer them. They eradicate the potential problems posed by uninsured motorists in accidents, thus making them attractive to drivers and the insurance industry alike. Additionally, these policies reduce the stress high auto insurance rates place on low-income working families.



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