Car insurance isn’t cheap for anyone, but if you’re out of work, it might seem impossibly expensive. And it’s not just your imagination (or your declining bank balance) that’s giving this impression. For years, car insurers have seen unemployment as a sign of increased risk and hiked premiums accordingly. We look at why this is and give you tactics for cutting car insurance costs so your car insurance is one less thing to worry about.
What is unemployed driver car insurance?
When you fill in a car insurance quote form on a price comparison site or directly with an insurer, you’ll be asked questions about your employment status and occupation. This is because some jobs are seen as higher risk than others.
Unemployed driver car insurance isn’t a special category of car insurance. Rather, it’s a policy that takes into account the fact that you’re out of work at the moment. Unfortunately, the impact of being unemployed on your car insurance premiums is rarely positive.
Can I get car insurance without a job?
You certainly can, but it’s likely to be much more expensive.
Before we get into why unemployed people are hit with higher fees and how you can get cheaper insurance, it’s worth saying that you shouldn’t list yourself as unemployed if you don’t have to. There may be another option that describes your occupation more accurately.
For example, if you’re not working by choice, you might get a lower premium by listing yourself as a student, retiree or stay-at-home parents instead of unemployed.
That said, if you usually have a paid job but are currently out of work and seeking a new role, it’s best to be honest and list your occupation as unemployed. Lying, or bending the truth, on an insurance application can invalidate your policy.
Is car insurance more expensive if I’m unemployed?
Typically, yes. Depending on your profession, it could potentially be hundreds of pounds higher than when you’re working. The reason for this is that unemployed drivers are often seen as higher risk than those in employment. And “risky” customers get charged higher premiums.
For this reason, you may be less likely to see major changes if you were previously in a job that insurers see as high-risk, such as a chef or a pharmacist, than if you were in a low-risk job (such as a mechanic or designer).
Why are unemployed drivers seen as a higher risk?
Car insurance companies take into account dozens of factors when working out your premium. Your occupation is just one of them. Here are some of the reasons that insurers might consider you to be a higher risk if you’re out of work.
You’re likely to travel more. Unemployed people are likely to spend more time driving around to attend job interviews, potentially in unfamiliar areas. Given the more time you spend on the road the more likely you are to have an accident, insurance premiums will rise.
You may be distracted. Insurers think that unemployed drivers may not have optimum levels of concentration because of their circumstances. This again can make them more of a risk behind the wheel.
Car maintenance may be a lower priority. Insurance providers think that unemployed people might be less able to afford routine car maintenance, which could increase the likelihood of an accident.
They see you as a higher credit risk. If unemployment means you’re short on cash, you may be less financially able to settle debts (or pay monthly insurance premiums, for example).
They see you as more likely to claim. Insurers often point to reports that show unemployed people are more likely to be involved in accidents. They may also be concerned that the long-term unemployed are more prone to making fraudulent claims.
Do I have to list my employment status as unemployed?
If you are genuinely unemployed – as in you’ve lost your job and are on the hunt for a new one – then yes, you should list your profession as unemployed. Failure to tell the truth on an insurance application risks invalidating your policy. It could mean that any claims you make are declined.
For the same reason, you should also tell your insurer if you lose your job mid-term. Most policies will have a clause that requires you to tell them about any changes that could affect your premiums, such as your address or employment status.
However, and this is important, don’t default to putting your employment status down as unemployed just because it’s the first relevant option on the list. If you’ve made an informed choice to stop work, temporarily or permanently, there may be other occupations that more closely match your current situation. Insurers may see many such non-employed roles as lower risk and charge lower premiums accordingly. For example, you might be one of the following:
Retired
A mature student
A stay-at-home parent
A homemaker.
What are the different types of car insurance and which is cheapest for unemployed drivers?
Unemployed drivers have the same choice of car insurance types as other drivers. The following are the 3 main levels of annual car insurance:
Third party car insurance. As the name suggests, this only insures you against damage you cause to other people and their cars or property. If you or your car suffer harm, it won’t pay out. It’s the most basic level of cover and a legal requirement.
Third party, fire and theft car insurance. This does everything third party cover does. Plus, it covers you in the event your car is damaged or destroyed by fire or stolen.
Comprehensive car insurance. This is the highest level of cover. In addition to the above, comprehensive insurance will also pay out if your car is damaged or written off in an accident as well as against some other risks such as severe weather damage.
Having read these descriptions, you might assume that third party cover is likely to be the most cost-effective choice for unemployed drivers. In fact, thanks to a slightly complex Catch 22, it’s often not. It used to be the cheapest type of cover, but insurers noticed that third party insurance was particularly popular with high-risk drivers, such as young drivers and those with high-risk occupations. This in turn drove the cost of third party insurance up.
The end result, surprising as it may seem, is that comprehensive car insurance is often just as cheap (or sometimes cheaper) than the 2 lower levels of cover. So your best bet as an unemployed driver is to get quotes for all 3 and compare your options. Don’t forget to also take into account the much higher levels of financial protection that comprehensive cover offers.
How can I get cheaper car insurance as an unemployed driver?
If you’re unemployed or even just looking to shave a bit off your premiums, there are several tactics you can use to keep costs as low as possible.
Consider a telematics policy. These policies involve fitting your car with a black box or telematics app. This measures your speed, distance travelled and the time of day or night you’re driving. If you drive carefully, it can help lower your premiums. But watch out – if you’re a bit of a speed demon, it could push them up.
Reduce your risk level. There may be adjustments you can make to your car or your driving habits that reduce your risk level and your premiums. We run through a few of these below.
Opt for a higher voluntary excess. Your excess is the amount you contribute to a claim before the insurance kicks in. Voluntarily accepting a higher excess can give you a lower premium. But it may mean it’s not worth making smaller claims, and make sure you can afford to pay the excess should you need to.
Pay your full premium upfront. Paying the full annual premium when your policy starts is typically cheaper than paying in monthly instalments.
Build a no-claims discount. Drive responsibly and avoid making any claims. Over time, you should see your premiums go down (assuming nothing else changes to increase your risk, such as a new, faster car). Even a year of claims-free driving can get you a discount of up to 30%.
What can I do to reduce my risk level as an unemployed driver?
Car insurance underwriters take several factors into account when they work out your overall premium.
Some factors you have little control over, such as your age, the car-related crime rate in the area you live in or any health conditions. And external factors play a part too. New laws or regulations or increases in the cost of car parts could affect premiums. Or if your insurer has had a particularly expensive year due to there being lots of claims across the board, it might look to offset the cost by raising premiums on all its customers.
But there are a few things you have some control over. How big an impact they’ll have on your premium will vary. It could be worth testing out a few variables on a price comparison site to see if they’re changes worth making.
Drive a lower-risk car. Powerful, expensive cars incur higher premiums. If you need to keep costs down (for car insurance and, probably, car running and maintenance costs), consider downgrading to a car in a lower car insurance group.
Reduce your annual mileage. The less distance you put in each year, the lower your premiums are likely to be.
Improve your car’s security. If you can, park in a safe spot such as a private driveway or garage. And consider installing an alarm or immobiliser if your car doesn’t already have one.
Avoid non-security-related modifications. If you’re out of work, paying to pimp your ride may be the last thing on your mind. But if you had any upgrades planned, it may be best to bin them. Modifications such as new spoilers, tinted windows or even an upgraded audio system can push up insurance costs.
Add a low-risk named driver. If a partner or family member is an experienced and claims-free driver with none of the usual risk factors that push up premiums, adding them as a named driver to your policy could reduce your premiums. That’s because the insurer will assume the lower-risk driver will be using the car at least some of the time.
How can I find the best car insurance if I’m unemployed?
The number one tactic to employ is the same as for any other driver: shop around. Every insurer has its own underwriting criteria, and some will penalise being out of work far less harshly than others. So don’t assume the insurer that was cheapest when you were working will necessarily still be the cheapest if you become unemployed. Use a price comparison site as a starting point to compare quotes, and check with direct-only car insurers (such as Direct Line) too.
Bottom line
Losing your job is tough enough. Knowing it’s likely to increase your car insurance costs just adds insult to injury. But it’s important to tell your insurer, even if it pushes up premiums. If you don’t, it could invalidate your policy entirely. Fingers crossed, it’ll only be a short-term blip and you’ll be able to restore your employed status (and lower premiums) before too long. If it doesn’t quite pan out this way and you’re still between jobs come car insurance renewal time, use the tips in this guide to keep costs to a minimum.
Frequently asked questions
Your provider will use an algorithm to work out your car insurance premium, with several factors all contributing to the overall cost.
Personal factors such as where you live, your vehicle, your age, your health and your recent driving record will play a part in your premium. If your insurer has had a particularly expensive year due to there being lots of claims, it might look to offset the cost by raising premiums on all its customers too.
Changes in laws and any increase in the prices of car parts will change your policy costs too.
Yes. By law, you are required to have at least third party car insurance to drive on UK roads. The only exception is if you keep your car on private land and officially declare it off the road (SORN). If you do this, you can’t drive it at all.
If you’re not currently in paid employment but don’t consider yourself unemployed, check the list of occupations on an insurance form carefully. Choose the one that most closely matches your situation. Selecting “unemployed” by default could result in your premiums being hiked unnecessarily.
Yes. Most insurers have a clause that requires policyholders to tell them about any changes that could affect their premiums. This could be a change of address, a car accident (even if no claim is made) or a change in employment. Doing so could push your premiums up. However, if you don’t inform your insurer, it could mean your policy is completely invalid. This could effectively leave you without cover in the event of a claim. The cost of this could be much higher than that of any premium hike.
It can. Often, a reduction in premiums is linked to changes in your driving habits. For example, retirees are unlikely to need cover for commuting and may put in fewer miles annually. Plus, if you previously worked in a profession that insurers consider high risk, changing your occupation status to “retired” may in itself have a positive impact. It’s not a sure thing though. If you decide to use part of your pension pot to buy a flashy car, this could wipe out any potential savings. And if you spend your retirement road-tripping around the UK, your mileage could even increase.
A higher car insurance premium is just one of the things that can put pressure on your finances if you lose your job. If you and your family would struggle to manage if you lost your income, there are forms of insurance that can offer peace of mind. Head over to our guide on income protection insurance for more information.
If you’re still using your own car fairly regularly, then probably not. Unless your car is declared off the road (or SORN), it needs to be constantly insured even if you’re not driving it every day. Per day, temporary car insurance is much more expensive than annual insurance. This means it’s unlikely to be a cost-effective alternative even over a short period. The only occasion when temporary car insurance might be worthwhile is if you did decide to declare your own car off the road to save money and borrowed a partner or family member’s car for a day or two when you needed to drive. You could then use temporary car insurance to get cover to drive their car only for the times you needed it.
*Based on data provided by Consumer Intelligence Ltd, www.consumerintelligence.com (July ’24). 51% of car insurance customers could save £523.17
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Ceri Stanaway is a researcher, writer and editor with more than 15 years’ experience, including a long stint at independent publisher Which?. She’s helped people find the best products and services, and avoid the pitfalls, across topics ranging from broadband to insurance. Outside of work, you can often find her sampling the fares in local cafes. See full bio
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