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Insurance, and the Burden on the Poor


Insurance is required by law to drive your vehicle, required by your bank to protect your vehicle, and needed by everyone to protect their assets. It's hard to argue that insurance is bad with how many people it helps, but the costs of insurance can often fall on the poor, while most of the benefits go to those who are in financially secure position. It's another example of how expensive being poor can be. There are a few different ways that this happens, two of which stand out. You may experience two or three times the cost for insurance as your peers based solely on your inability to pay the bill and your credit history.

Most of these additional costs, at least at first glance, are justifiable and can often accurately evaluate the risk of a policyholder, but even then it can be morally questionable. One of the major causes of drastic increases in insurance premiums come from a lapse in coverage. A lapse in coverage refers to any period within the last 3 years where your policy has been canceled, even if that period was less than 24 hours, even if you didn't drive during that period.

The cause of the policy cancellation doesn't really matter. If your policy was canceled by your insurance company and you didn't acquire new coverage before that period, you then have a lapse in coverage. That is understandable, as everyone maintaining continuous coverage is a big factor in reducing everyone's insurance rates. The problem comes in when your policy triples in cost because you did not have the money to pay the bill.

If your policy cancels for non-payment, you have a lapse of coverage. After that lapse, when you go to start coverage again, even if it is the next day, your risk has skyrocketed. Even if you have never been involved in an accident in your life, if you've never had a ticket or any other cause to assume you are a poor driver, you are removed from a low-risk platform and placed into a "non-standard" policy. These non-standard policies are the same that are reserved for those with frequent accidents, a DUI, or other forms of violations that would indicate you being at high risk for a loss.

This kind of high-risk policy can typically double or triple your premium, and offer you far less coverage. More often than not, it's those in bad financial standing who can't pay their bill, putting some people who have not ever made a traffic mistake into an extremely high-cost policy simply because they could not afford to pay the bill.

To top it off, this lapse of insurance will put you into the high-risk platform for at least six months, regardless of how short your lapse was. These far higher bills make you more likely to be unable to pay your bill, placing you in a cycle that keeps you paying far higher insurance premiums, regardless of the actual driving risk you represent.

This is not the only way being poor can cost you far more in your insurance premiums. It is possible to be placed into this high-risk policy based on your credit score alone. One of the largest factors in determining the cost of your insurance policy is your credit score. There are cases where someone will pay more for their insurance because of their credit score than someone with a DUI and otherwise equivalent driving history. This puts those with poor credit at an unjustly higher risk of non-payment, perhaps causing a lapse as well. The effects of a poor credit score on an insurance policy will last as long as your credit remains that way.

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Sergio Cruz

Head Writer

Sergio has been writing for online blogs and news sites for almost 10 years! There isn't a topic he hasn't written about. When he's not busy researching and writing articles, Sergio likes to spend his time traveling and playing guitar.