A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 18, 2021

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Here's what you need to know...

  • If you’re shopping for auto insurance and you’re unemployed, your employment status can have an effect on your rates because of how insurance policies are rated
  • Insurance companies can’t deny someone insurance for being unemployed, but you must pay your premiums to maintain your coverage
  • Vehicle usage is a rating factor and being unemployed may qualify you for the lowest priced ‘pleasure’ rating
  • If you’ve left your job or you decide to retire, it’s important to notify your insurer to see if there’s a change in your ratings and premiums
  • It’s possible for your premiums to change if your employment status affects your credit and you have insurance through a company using credit-based insurance scoring practices

Losing your job can certainly lead to financial devastation. Not only must you worry about covering your bills, you have to worry about how being unemployed can affect how much you pay for your coverage. You could lose your disability insurance, your group life coverage and be forced to pay high premiums for COBRA health plans. You also have to worry about the impact that being unemployed will ultimately have on your auto insurance premiums and your policy altogether. Start comparing car insurance rates now by using our FREE tool above!

While employment status can have a direct effect on your policy rating, it’s the indirect effect it has that makes the biggest difference. If you’d like to learn what you can expect to happen to your insurance through a period of unemployment, read this guide and you can learn everything that you need to know to notify your insurer and to manage your insurance costs.

Can an insurance carrier cancel your coverage for any reason?

Companies have 60 days to review applications and look at risk. If you have an existing insurance policy, the carrier is limited in the reasons why they can drop your coverage after the policy has been in force for more than 60 days. Some of the reasons your policy can be cancelled or rescinded include:

  • Failure to pay premiums by the end of the grace period
  • You’re guilty of misrepresentation on your application
  • You’ve been convicted of fraud
  • You’ve violated the terms of your policy and it can be proven
  • Your license has been suspended
  • You’ve been diagnosed with a medical condition that makes it unsafe for you to drive

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Can an insurance company drop you because you’ve lost your job?

Going from employed to unemployed is not one of the reasons an insurance company can cancel or non-renew your policy. In fact, insurance companies who are assessing your application for coverage can’t deny you coverage just because you’re jobless at the moment. This is part of your rights as a consumer shopping for auto insurance coverage.

How will unemployment directly affect your auto insurance rates?

Unemployment can’t erase your eligibility for auto insurance, but there’s no rule saying it can’t affect your rates. You might automatically assume that being unemployed will lower your rates, but that’s not always the case.

Companies in this industry base the rates they charge on how much risk you present as a driver.

There is a long list of risk factors that are used in determining premiums and some of these factors might surprise you. To some companies, being unemployed actually puts you in a riskier group simply because you have the time to be on the road more often to run errands all times of the day.

Will your occupation have an effect on rates?

While it’s not standard all across the board in North America, some companies will charge you special rates based on your occupation. This is because it’s believed that some professionals statistically drive better than others, even if it’s not always true on an individual basis. If you go from a lower priced rating class to being unemployed, you might see a noticeable difference in rates. Statistically, professionals in the following occupations may receive better rates:

  • Nurses
  • Educators
  • Principals
  • Insurance Agents and Brokers
  • Pilots
  • Ambulance Drivers

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What other factors can be used to change your risk classification?

Occupation isn’t the only thing that can change your likelihood of having a claim. Some factors can change and others are beyond your control. Here are some of the risk factors you might be surprised to learn can impact your rates:

  • Annual mileage
  • Vehicle usage
  • Vehicle type, size and safety rating
  • Driving record
  • Accident record
  • Age of driver
  • Years of driving experience
  • Gender
  • Credit score
  • Prior insurance
  • Region you live in

How can employment status have an effect on other rating factors?

As you can see, a lot is taken into consideration when a company calculates your personalized rates. Now that you know the risk factors, it’s time to learn how being unemployed can affect these. Here’s some of the different ways your premiums could go up or down because you’ve lost your job:

  • Vehicle Usage: When you’re commuting to work, you will be listed as either a commuter or a business user. This will obviously change once you’re unemployed. As a driver who doesn’t commute, you’ll be rated as a pleasure driver. Since this is the lowest priced rating, it can help lower rates.
  • Annual Mileage: When you don’t have a commute, it’s common for you to drive less. It’s important to update your annual mileage estimates so that you can save money. If you drive less than 12,000 miles per year, you may qualify for a low-mileage discount.
  • Credit-based Insurance Score: While it’s not a definite, being unemployed can affect your credit if you’re not able to pay your bills. Every renewal, insurance companies that are legally allowed to check your credit may run your credit score to see if you’re more of a risk now than you were at the beginning of the term. If it’s found that your score has gone down, this could affect your rates for the rest of the year.
  • Prior Insurance: Having consistent insurance free of lapses shows a company that you’re responsible. If you’ve been unemployed and unable to keep your coverage active, it could erase those prior insurance and loyalty discounts that you once received.

As you can see, you can get insurance when you’re unemployed but it can affect your rates. Be sure that you update your insurance when a life event like this happens. If you’re not happy with your updated rates, make sure you compare the rates offered by other companies servicing your area. You can do this all on one platform in just minutes by using an online insurance premium quote comparison tool. Start quoting and then you can decide which policy you can afford during unemployment. Enter your zip code in our FREE tool below to get a FREE car insurance comparison now!