Even a no-frills vehicle represents a huge expense for the 4 million or so Americans working a minimum-wage job.
But it represents a bigger challenge in some places than in others. Young drivers in Rhode Island will work nearly four times as long as their counterparts in Illinois to buy the legally required state-minimum liability coverage, according to a CarInsurance.com analysis.
We ranked states by the number of hours needed to buy coverage, comparing their cheapest car insurance for 18-year-olds with their minimum wage.
This is as cheap as insurance gets, and there are few trade-offs available to save further. For example, you can’t reduce your limits below the minimum amounts. And you can’t raise your deductible. There are no deductibles on liability insurance.
Where you live matters – a lot
The Bureau of Labor Statistics says the average hourly wage in the U.S. was $24.17 in December 2013. The average annual outlay on liability car insurance, says the Insurance Information Institute, was $492 as of 2011.
The means an average worker could buy a year of liability coverage with about 20 hours of work.
But consider an 18-year-old working an entry-level job. The average state minimum wage in 2014 is just $7.60 an hour. And teenagers pay much more for insurance: The average price of a year of bare-bones coverage was $841, using rates gathered from the national carriers in CarInsurance.com’s online quotes tool.
At those averages, a year of state minimum liability insurance would require 111 hours of work.
Because both wages and car insurance rates swing dramatically, we looked at affordability by comparing the cost of legal-minimum auto insurance with each state’s minimum wage. Young drivers in Rhode Island had it worst, with 196 hours required to buy the cheapest liability policy we found. A young driver finds not only much cheaper insurance in Illinois but higher wages as well; a year of liability insurance takes just 56 hours of work.
The cheapest states for young drivers
These are best-case scenario numbers.
We compared rates using the state’s cheapest ZIP code for a young driver with clean record, good credit and previous insurance on a parent’s policy. We chose the least expensive rate we found. Unless you’re 18, male, a resident of the particular addresses we used and proud owner of a 1997 Ford Taurus, your quotes probably won’t exactly match ours, which are only a snapshot of available rates.
They are, however, a good indicator of the financial hurdle confronting any teenager who depends on his own car to commute to school or work.
What an 18-year-old pays for state-minimum liability
|Rank||State||ZIP code||Annual liability cost||Minimum wage||Hours to buy|
* Data missing or unavailable at time of publication
** States that have no minimum wage or a minimum wage lower than the federal wage are displayed at the federal minimum.
What you can do
The cost of liability insurance has more to do with the driver than the car. (The insurance company isn’t going to fix your car, just the person’s you hit.) In your search for affordable auto insurance, these are the factors you have some control over:
- Your driving record: More than one violation or accident is going to hurt.
- Your credit: If it’s dismal, you’re seen as a bigger risk of a claim and thus charged more in many states.
- Your mileage: The less you drive, the less risk of your hitting someone.
- Your insurance history: If you’ve let your policy lapse, even for a few days, you’ll pay about 5 percent more than you would have otherwise, according to Insurance.com.
- Your insurance company: No two insurers offer identical rates, and even on state-minimum policies, premiums can differ by hundreds of dollars a year.
Insurers do look at your car, and if it has a significantly higher rate of claims than most (because, say, it’s driven mostly by young drivers), your liability rates will reflect that risk.