Is Car Insurance Cheaper If You’re Self Employed?

Last Updated on August 20, 2020

Most people assume car insurance is cheaper for the self-employed as self-employed business owners often work from home.  After all, those who have a short commute to work or no commute at all typically have comparably low auto insurance rates.   Let’s take a look at exactly what might happen to a driver’s auto insurance rate after becoming self-employed.

Is the Vehicle Used for Business?

self employed auto insuranceIf the vehicle is used for business, there is the potential for the auto insurance rates to increase.  However, if you do not use the vehicle for work, your insurance rate will likely decrease as long as you do the bulk of your work at home.  Most auto insurance providers use the driver’s distance to and from work as partial determinants of the insurance rate. So be sure to tell your auto insurer you will be working from home if you make the transition to self-employment.

About That Group Insurance…

There is a chance you will lose your group auto insurance rate when leaving your employer for self-employment.  However, if you never had the benefit of a group auto insurance policy, there is nothing to lose by shifting to self-employment.  Group insurance reduces monthly auto insurance premiums by distributing risk across numerous drivers. Going it alone with self-employment is bound to cause an increase in the amount paid each month compared to the cost of auto insurance through a workgroup.

Tax Savings

If you use your vehicle for your business, you will likely be able to deduct a percentage of the insurance and other costs as a business expense.  Even vehicle repairs and maintenance have the potential to be deducted when tax season rolls around. Just be sure to keep all of the receipts for auto service to facilitate tax filing in April.

If You Work From Home, Consider Reducing Auto Insurance Coverage Levels

There is no sense for those who work from home and rarely drive to have maximum auto insurance coverage.  After all, if you are merely logging 5,000 to 7,000 miles each year, the odds of an accident are comparably low.  This might be an opportunity to lower your coverage levels and save a nice chunk of change each month when the auto insurance premium is due.

When in Doubt, Get More Quotes

If you are unhappy with your auto insurance rate after shifting to self-employment, shop around.  Get quotes from other auto insurance providers. Just be sure to tell these insurers about the details of your self-employment.  This way, you can get accurate quotes based on your unique commute or lack thereof. Get five or so quotes and you will likely find at least one that is slightly cheaper than your current insurance provider’s rate.

Consider Keeping a Mileage Log

Auto insurance rates that increase due to self-employment have the potential to decrease.  However, you have to be willing to make some changes and communicate with your insurance provider.  It might be in your interest to track your daily mileage. Crunch the numbers and it just might turn out you are not using your vehicle as nearly as frequently as you assumed.  Provide the accurate daily mileage average to your auto insurance provider and your rate will adjust accordingly. Furthermore, if you find you use your vehicle less for business and more for personal enjoyment, report it to your insurance provider.  The fact that your vehicle is not used for business at a high frequency will likely reduce your auto insurance rate.

The Nature of Your Work is an Important X Factor

Auto insurance rates for the self-employed are largely dictated by that individual’s daily activities.  Those who deliver products or drive to client locations to render services just might end up paying even more for auto insurance in the years after becoming their own bosses.  However, those who sit in front of a computer in their home office or bedroom will likely pay less for auto insurance. Be honest with your auto insurer about the nature of your work.  If you transport valuable items as a part of your daily work routine, tell your insurer. Even the transport of passengers plays a role in your auto insurance rate. Tell the truth, get several quotes and you will likely find a fair rate.

Consult With an Accountant for Tax Assistance

It is a mistake to assume you will be able to accurately track the costs, deductions and other nuances of the tax system to ensure you have minimized your auto insurance costs.  Do not be afraid to ask for assistance from an income tax specialist. An accountant who understands the intricacies of the tax code will help you pay as little as possible for auto insurance.  This is the assistance you need to minimize your expenses, keep your business in the black and rest easy knowing your taxes are all squared away.

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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