Does Welfare Pay for Car Insurance?

Last Updated on August 9, 2020

All 50 states require drivers to have some type of car insurance. But car insurance is expensive – especially for someone with low-income.

Today, we’re explaining everything you need to know about welfare and car insurance, including whether or not welfare pays for car insurance and the other car insurance options available to low-income drivers.

Does Welfare Pay for Car Insurance?

You Should Be Able to Spend Certain Welfare Money on Car Insurance

For many Americans, driving isn’t a luxury: it’s a necessity. You need a car to drive to work every day. You need a car to get groceries.

Welfare rules vary widely between programs. Generally, however, if your welfare benefits come in the form of cash, then those welfare payments are yours to spend however you like.

If car insurance is a necessary expense for your day-to-day life, then you should have no problem spending welfare money on car insurance.

However, the nation’s largest welfare programs – like Medicaid, SSI, and SNAP – don’t provide welfare in the form of cash. They provide healthcare or food stamps.

Types of Welfare Programs in the United States

Not all welfare programs work the same way. If you receive food stamps, for example, then you cannot spend food stamps on welfare payments. If you are covered by Medicaid, then you cannot use Medicaid for car insurance.

Welfare programs vary widely between states. Some states have extensive social safety net systems, while other states have few options.

At the federal level, however, there are six major U.S. welfare programs:

  • Temporary Assistance for Needy Families
  • Medicaid
  • Supplemental Nutrition Assistance Programs
  • Supplemental Security Income
  • Earned Income Tax Credit
  • Housing Assistance

The federal government funds these programs, while states administer the programs. Some states provide additional funding.

Welfare programs are based on a family’s income. If your family of four makes $15,000 per year, for example, then you may be eligible to receive more welfare benefits than a family of four making $20,000 per year.

To qualify for welfare, your income will need to be at a specific level in relation to the poverty line. In 2019, the federal poverty level is set at $25,750 for a family of four. Some states or cities have different poverty levels.

A significant number of Americans rely on welfare for their daily needs. 65 million low-income adults, for example, were covered by Medicaid in 2019. Medicaid also covers approximately 40% of all U.S. births.

States with Low-Income Car Insurance Options

There is no federal welfare program for car insurance. The federal government does not have a nationwide car insurance program for low-income drivers.

However, some states have implemented their own low-income car insurance systems. As of 2019, three states have some type of low-income car insurance option, including California, New Jersey, and Hawaii.


The California Low-Cost Automobile (CLCA) insurance program offers basic liability and underinsured motorist protection for drivers who meet certain eligibility requirements. To qualify for CLCA, you must meet the following standards:

  • Be within 250% of the federal poverty limit ($25,750 for a family of four)
  • Own a car worth less than $25,000
  • Have a good driving record

If you meet these three qualifications, then you may be able to get cheap car insurance through the California Low-Cost Automobile insurance program.

New Jersey

New Jersey’s Special Automobile Insurance Policy (SAIP) covers emergency medical costs if you are in an accident. It does not cover liability costs or damage to your own vehicle. Priced at around a dollar per day, SAIP lets you legally drive at an affordable price.

To qualify for SAIP, you must be enrolled in Medicaid. That’s the only qualification for New Jersey’s low-income car insurance.

SAIP is a last resort for low-income drivers in New Jersey. It provides a minimum level of protection. However, if you’re on a tight budget and don’t want to drive uninsured, then SAIP is one option.


Hawaii provides free car insurance to people with disabilities who are 65 years or older and have an income below 34% of the federal poverty line. This low-income auto insurance system is managed by Hawaii’s Assistance to the Aged, Blind, and Disabled (AABD) services.

Affordable Car Insurance for Low-Income Drivers: Tips for Low Income Car Insurance

Fortunately for low-income drivers, the car insurance industry in America is very competitive. Whether you’re looking for ultra-budget options or good-value car insurance, you should be able to find good car insurance at any budget.

Here are some tips that will help you get the cheapest possible car insurance:

Shop Around: First and most importantly, shop around for car insurance to find the cheapest rates. Some companies – like The General – specialize in insuring high-risk drivers at the lowest possible cost. Other companies target high-income drivers willing to pay higher rates for better customer service. GEICO, USAA, State Farm, and Travelers are all known for offering cheap car insurance prices nationwide. However, rates vary widely between states. Check a car insurance comparison form to get the best deal.

Insure a Low-Value Car: The cheapest cars to insure are older, smaller cars with more safety features. If you’re shopping for a new vehicle, consider the cost of insurance before you buy it.

Reduce Coverage Limits: Most budget-conscious drivers will reduce coverage to the lowest legal minimum limits. If you’re on a tight budget, buy car insurance that meets your state’s minimum limits.

Remove Comprehensive and Collision Coverage: Comprehensive and collision coverage are optional in every state. They cover the cost of repairing damage to your own vehicle. If you’re on a tight budget, you can cut insurance costs by as much as 50% by dropping comprehensive and collision coverage.

Raise your Deductible: Raising your deductible can cause car insurance premiums to drop. You’ll pay more if you need to make a claim, but you’ll save money if you never make a claim. Always set your deductible at a level you can afford to pay.

Take Advantage of Discounts: All car insurance companies offer discounts. You can get a discount for being a senior, student, or good driver, for example. You can get reduced mileage discounts, advance payment discounts, and professional group or affiliation discounts. Research insurance discounts to drop insurance prices substantially.

Final Word – Can Welfare Pay for Auto Insurance?

If you receive welfare payments as cash, then you are free to spend that cash however you like.

However, many federal welfare programs in the United States – like Medicaid and SNAP – provide benefits in the form of health care or food stamps, in which case you will not be able to use these benefits on car insurance.

Low-income drivers in California, New Jersey, and Hawaii may qualify for cheap state-provided car insurance. Low-income drivers in all other states can compare car insurance quotes online to ensure they’re getting the best deal on car insurance.

James Shaffer
James Shaffer James Shaffer is a writer for and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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