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Things to Remember...
  • Every state in America requires that drivers carry a minimum amount of car insurance so that all parties are protected if an accident would occur
  • Government auto insurance is a state sponsored program that helps lower income families get the car insurance that they legally need to be able to drive their car
  • A person, if they do the right shopping and understand their insurance policy, can get a traditional plan for a price that is not too much higher than a government sponsored auto insurance plan
  • In short, while government car insurance may not be the best policy that is available, it can save a person a lot of money, stress and headache in the long run

Every state in America requires that drivers carry a minimum amount of car insurance so that all parties are protected if an accident would occur.

Each state has their own laws in regards to how much insurance is required, but it is a fact that it is illegal to drive without auto insurance. When shopping for car insurance, people often find that insurance can be expensive and in order to be able to drive, some people have to give up other things, like food, just to be able to drive.

While they are not widely advertised, states have programs for people to help them get car insurance despite having a lower income.

A recent study shows that a vast majority of lower income households spend up to 30 percent of their income on car insurance alone, which is an outrageous amount considering the other expenses that they need to pay.

Even though government auto insurance plans help ease the financial burden, it is important to always get quotes from multiple sources before deciding on a plan.

Always compare auto insurance before buying. Use our FREE quote tool above and enter your ZIP code to get started.

What is Government Auto Insurance?

AdobeStock_117123659-1600x1600Government auto insurance is a state sponsored program that helps lower income families get the car insurance that they legally need to be able to drive their car.

It can either provide a subsidy to the family to help with their car insurance bill or it can be a program run entirely by the state government.

This insurance plan is not sponsored by the federal government since all 50 states have different laws and requirements when it comes to the issue of auto insurance. The main goal of the program was to get more drivers on the road legally since a number of uninsured drivers were trending higher and higher each year.

Who Qualifies for Government Car Insurance?

It will all depend on the state program as to whom qualifies for the government auto insurance program, but it will typically cover the people who need it the most. Generally, if a person’s insurance payment is ridiculously high when compared to their income, then that person will probably qualify.

A popular measurement of financial eligibility is the poverty income statistic that is released every year by the federal government.

A person will definitely be eligible if they fall under the poverty level, but most states allow the income to be up to 250 percent of the poverty income level.

Also, family size is considered into this, so a family of three needs to have a lower income than a family of six.

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Can All People Get Government Auto Insurance?

Unfortunately, not all people who need the insurance will be able to qualify for it. A person must have a good driving record in order to qualify for the program, and in addition to the income requirement, the vehicle usually cannot be valued over a certain amount, usually between $20,000 and $25,000.

Also, even though the government program helps people get insurance, it still will not be affordable for all people.

Some people simply do not have any money to spare, and most people will decide to put food on the table before paying their car insurance bill.

Premiums can be as low as $30 a month, but that may not be affordable for all people.

Is Government Auto Insurance Better Than Normal Policies?

AdobeStock_91362395-1600x1600Most government policies do not provide the same coverage as a regular auto insurance plan. The biggest example in most states is that they do not provide medical coverage for the driver, just the passengers.

The reasoning behind this is because most people who qualify for low income insurance will qualify for free health insurance through the state, so there is no need for the excess coverage. This helps keep the premium lower as well.

Also, there are not a lot of options available on a government plan, so a person will not get special coverage such as rental car reimbursement, GAP insurance or roadside assistance.

A person will also have to deal with new people all the time when they have insurance issues since this insurance is typically issued through a call center.

Are There Other Government Plans?

This is the main plan that is available to people with low income and these plans are typically the only government sponsored plans that are available. However, there may be other plans available to people if they are employed at a government agency or in the military.

Most major insurance companies offer discounts to government workers and those in the military, whether they are active or veterans. This is where comparison shopping for the best insurance rate really comes in handy.

When shopping for car insurance, a person needs to make sure that the agent is aware if they are a government worker or was in the military, because they can often secure large discounts for people like this.

How Can a Person Find Cheap Traditional Coverage?

A person, if they do the right shopping and understand their insurance policy, can get a traditional plan for a price that is not too much higher than a government sponsored auto insurance plan.

Insurance companies offer a ton of different discounts depending on each driver’s situation.

A potential insurer can get a discount for buying the policy online, receiving their bill via email, taking a driver’s education course, having a spotless driving record, being a student with good grades, a military veteran, a homeowner and many more scenarios.

Whatever the case may be, it is important that a person looks at all possible insurance companies to see which one meets their needs and will give them the best rate overall.

Should People Buy Government Auto Insurance?

adobestock_113202604-1600x1600Government auto insurance is for people who have no other option at their disposal, mostly due to a lack of income. If a person has to pay $100 a month for car insurance, most poor people will choose to run the risk of getting caught since they can use that extra money for food.

However, legally, a person needs and should have insurance for many reasons. First of all, a person that is caught driving without car insurance can face hefty fines and they may even lose their license.

While the time and the amount of the fine varies by state, they can do a lot of damage and often will be more than the cost of just paying the insurance premium. Then, if the person does not pay their police fine, they could be doing jail time for failure to pay.

Also, if a person is in a serious or fatal accident and they do not have car insurance, they could be paying for that accident for the rest of their life.

The person who does not have insurance would be liable for the other person’s medical bills, replacing their car, covering property damage and more.

The cost could be in the hundreds of thousands of dollars, and if a judgment is placed against the uninsured driver, the courts can garnish future wages to pay for the judgment.

In short, while government car insurance may not be the best policy that is available, it can save a person a lot of money, stress and headache in the long run.

Not only does this policy make it legal for a person to drive, but it covers their liability if they are in any type of accident. People need to look around and compare rates for a government plan to see if it makes sense for them to use.

The easiest way to compare rates for FREE is by using our ZIP code tool at the top of this page.

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Things to Remember...

  • Auto insurance companies must provide robust plans, fair pricing, and prove that they are financially sound enough to pay claims for their large and diverse customer base.
  • The government’s position is that insurance regulations should be maintained on a state-by-state basis, rather than at a federal level.
  • In the United States, insurance companies are regulated on a state-by-state basis. These agencies are typically referred to as the “Department of Insurance” or the “Insurance Bureau” or something similar.
  • While there is no federal agency in charge of regulating insurance companies, there is a federal association called the National Association of Insurance Commissioners (NAIC) that brings together the heads of each state insurance regulation department.

Insurance companies are part of a large industry — one of the largest and most profitable in the United States. It’s important for these companies to be tightly regulated.

Auto insurance companies must provide robust plans, fair pricing, and prove that they are financially sound enough to pay claims for their large and diverse customer base.

Because of the size, scope, and importance of this industry, there are several ways these companies are regulated and overseen.

In addition to seeing who regulates auto insurance companies, you can also find reliable auto insurance rates through an online comparison. Use our FREE auto insurance comparison tool by entering your ZIP code!

No Federal Government Regulation of Insurance Companies

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It might come as a surprise to many people, but there is actually no federal agency in charge of regulating insurance companies — be they medical, automobile, life, or other insurance agencies.

That’s one of the most hands-off approaches in the entire federal government, as federal agencies do regulate things like banks, food processors, and even corporate office environments.

The government’s position is that insurance regulations should be maintained on a state-by-state basis, rather than at a federal level.

This is largely due to language in the Constitution which makes it difficult — if not impossible — for the federal government to regulate insurance coverage.

Instead, the Constitution essentially requires states to perform these duties, and the federal government has been careful to side-step an issue which could land them defending a Constitutional lawsuit in federal court.

State Regulation of Insurance Companies Varies

In the United States, insurance companies are regulated on a state-by-state basis. These agencies are typically referred to as the “Department of Insurance” or the “Insurance Bureau” or something similar.

Officials in these agencies are typically appointed by the governors of each state at the beginning of their term, much like cabinet secretaries at the federal level are appointed by the president.

Once these officials have been appointed, their job is to ensure that the insurance companies which operate in their state are providing fair prices to consumers, and offering them coverage that matches their needs.

These officials are also constantly focused on the financial solubility of the insurance companies which operate in their state, as these companies must prove that they are able to pay out large claim amounts to their entire customer base that resides within state boundaries.

State insurance regulation officials are also responsible for licensing companies to operate within the state’s borders. This means examining and accepting new insurance companies, as well as assuring that existing companies still qualify for state licenses to offer their products to local consumers.

State Insurance Licenses are Crucial Regulation Tools

While the state’s department of insurance regulation is one of the best ways to ensure that insurance companies are living up to their promise of fair coverage and financial strength, there is one tool that is more powerful even than these people who run this department: insurance licenses.

In order to offer insurance in any given state, insurance providers must obtain a license from the state’s department of insurance. This ensures that you can get reliable cheap local auto insurance.

This license can only be obtained after a thorough and very specific investigation of the company’s policies, finances, and operations. If a state deems a company does not meet their specific requirements, they can deny this license.

Furthermore, this license is often subject to periodic renewal by state authorities. At that time, the state’s department of insurance will examine the company’s prior reputation in the state, as well as any disputes or problems filed with state officials by consumers.

They’ll again examine policies, prices, and procedures, as well as financial solubility. After this process is complete, a license is either renewed or revoked. If revoked, an insurance company must stop offering its products in the state.

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The National Association of Insurance Commissioners

While there is no federal agency in charge of regulating insurance companies, there is a federal association called the National Association of Insurance Commissioners (NAIC) that brings together the heads of each state insurance regulation department.

This association meets periodically — typically on a semi-annual basis — and insurance regulators discuss what has worked for them, what has not worked, and which companies should be rewarded or punished.

It’s a great way for states to bring their insurance regulations and stipulations in line with each other and offer a somewhat unified approach to regulation without federal oversight.

Commissioners then go back to their home state and employ what they’ve learned from their peers throughout the country, helping customers to expect trustworthy online auto insurance from companies on their policies no matter where they live, or relocate to.

Insurance Companies are Regulated by Consumers

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While states devote a vast department of regulators and investigators to keeping insurance companies fair and honest, there is perhaps no bigger test of an insurance company’s polices and viability than the free market.

Consumers are increasingly informed and discerning, and they’re using a new set of tools to double-check insurance company offers, policies, and practices.

These tools often come in the form of an online insurance comparison tool, which sends a customer’s information to multiple insurance companies are returns a set of policies offered by all of the insurance companies that operate in their state.

In an online auto insurance comparison, customers are then able to examine, side-by-side, which policies are the most robust, the most affordable, and which policies are loaded with fine print that may endanger their coverage or peace of mind.

As word gets around in reviews, and customers decide which companies are the most fair, those that offer poor policies or harsh terms are often left behind. Their profit suffer, their customer base shrinks, and they reconsider their commitment to doing business in a state.

So, even though insurance regulators are constantly overseeing insurance companies, the true test of policies and coverage levels is the free market that determines which company gets the majority of consumer preference and profits.

Get peace of mind by comparing auto insurance rates using our FREE comparison tool!

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