Cheapest Car Insurance and Minimum Wages

Car insurance is quite a budget constraint for a lot of American households, but when you are making minimum wage it tends to be a major issue.

More than half of the four million Americans who earn minimum wage are 24 or younger. This article will analyze the liability insurance costs for a 1997 Ford Taurus driven by a 24 year old male driver with no previous claims, a good driving record and a good FICO score. We have chosen this particular car because it’s cheap (priced at around $2,500 on the used car market) and popular (around 250,000 of them are to be seen on American roads).

Minimum wages in the United States

The Federal government imposes a minimum wage of at least $7.25 an hour. Wyoming and Georgia still pay $5.15 as of April 2012, and Arkansas follows with $6.25. On the higher end of the payment scale we have Washington with $8.67, Oregon with $8.50 and Connecticut, District of Columbia, Illinois and Nevada with $8.25.

Cheap and expensive states for minimum wage workers

If you earn minimum wage, more than half of a month’s income will go towards insuring your Taurus. One of the few exceptions we found is Iowa, where the average premium for the state minimum liability of 20/40/15 is of $410 per year and minimum wage is of $7.25 – you can pay for a year’s coverage after 57 hours of work. Here are some other cheap states:

• Indiana: minimum liability limits of 25/50/10, average cost of $428, minimum wage of $7.25, resulting in 59 hours;
• Missouri: minimum liability limits of 25/50/10, average cost of $480, minimum wage of $7.25, resulting in 66 hours;
• Hawaii: minimum liability limits of 20/40/10, average cost of $492, minimum wage of $7.25, resulting in 68 hours.

New York is by far the most expensive state to insure your car. The minimum liability of 25/50/10 costs a whopping $1,544 on average and you will have to work for almost two months at a wage of $7.25/hour to pay for it. Other expensive states to insure your Ford Taurus are:

• District of Columbia: minimum liability limits of 25/50/10, average cost of $1,422, minimum wage of $8.25, resulting in 172 hours;
• New Jersey: minimum liability limits of 15/30/5, average cost of $1,230, minimum wage of $7.25, resulting in 170 hours;
• Michigan: minimum liability limits of 20/40/10, average cost of $1,216, minimum wage of $7.40, resulting in 164 hours.

What you can do when costs exceed your budget

Long story short, you can’t do much about it. Gasoline is another consistent expense for a driver, but it can be somewhat controlled – you can walk, ride a bike, use public transportation or carpool. There isn’t, however, a way to split your insurance expenses. The best you can do is make sure they won’t go up:

• Drive safely. First accident is usually forgiven, but from the second one your premium will go up.
• Keep a good credit score. Insurers monitor your FICO rating and, as soon as it drops below a certain threshold, you will be billed more.
• Shop around. Go online and compare car insurance rates. Prices vary from one insurer to another and, when you are on a shoestring budget, even a few dollars saved can make a difference.