High Risk Auto Insurance and Why Drivers are Denied Coverage
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High-Risk Auto Insurance and Why Drivers are Denied Coverage
In most states, not having auto insurance is illegal, which leaves high-risk drivers who have been denied insurance coverage with limited options.
So, what do you do if you are considered a high-risk driver and your auto insurance application has been denied?
If you have been denied a standard car insurance policy, you may have better luck getting approved by a high-risk car insurance company that writes non-standard auto policies. These high-risk auto insurance policies are typically more expensive and reserved for drivers who may pose an increased liability risk.
While finding insurance when you’re considered a risky or unsafe driver may be difficult, it is not impossible. Some leading auto insurance providers extend insurance to drivers of all risk tiers, including preferred, standard, and non-standard.
- Auto insurance companies base your insurance rates on your risk of filing a claim.
- Drivers fall into one of three major rating systems based on the insurance companies’ specific classifications. They are preferred-risk drivers, safe-risk drivers, and high-risk drivers.
- High-risk drivers are the least sought after by insurance companies and pay the largest premiums.
- A driver may be classified as high risk for insurance lapses, accidents, traffic accidents, poor credit, and filing many claims.
What Are Car Insurance Risk Tiers?
Car insurance companies use a rating system to determine your insurance rates based on the level of liability you present. Each company uses unique formulations to calculate your risk, so it’s essential that you do your research and compare car insurance coverage and rates with multiple carriers.
Most drivers fall into three of the following categories:
Preferred-risk drivers are the most sought-after by auto insurance. They receive the lowest rates because they pose the lowest risk of filing claims due to their history of responsible driving, no gaps in insurance coverage, little or no claims filed, and an excellent credit score.
Standard-risk drivers are good drivers who generally secure competitive rates. However, these drivers may have less-than-perfect credit and an accident or traffic violation on their record within the past three to five years.
High-risk or non-standard drivers pay substantially higher rates for their coverage. They are more likely to miss premium payments, let their insurance lapse, have accidents, moving violations, and traffic infractions, have a history of filing numerous claims, or have a poor credit score. In addition, high-risk drivers may not be eligible for higher liability coverage limits due to their risk factors.
Reasons You Can’t Get Car Insurance
An auto insurance company can deny car insurance coverage if they believe you are more likely to file insurance claims or miss payments compared to other drivers. While each insurance company uses different factors when determining your risk factor, let’s look at ten of the most common reasons they may deny you coverage.
1. You’re a New Driver
Young or inexperienced drivers are more likely to get into a car accident or receive a traffic violation. According to Science News for Students, “new drivers are four times more likely than adults to get into an accident.” While driving, it is easy to get distracted and this lack of focus is the primary reason new drivers are more likely to be involved in a collision.
Young drivers also lack knowledge and understanding of road rules, drive too fast, and use cell phones and other devices more often while behind the wheel. This behavior can contribute to why insurance companies are likely to deny coverage.
2. You’ve Never Had Auto Insurance Before
If you have a driver’s license but have never had auto insurance before, this may be a huge red flag for insurance companies. That’s because they believe the chances are pretty high that you’ve driven without insurance in the past, which is illegal. It also puts you at higher risk for unsafe driving practices that can lead to accidents or claims.
For these reasons, auto insurers may deny your auto insurance application.
3. You Have a Poor Credit History
Many auto insurance companies use your credit score as a factor, along with others, in assessing your risk potential.
Although credit scores determine your level of financial responsibility related to how you’ve paid loans and credit card companies, auto insurers use it as a tool in determining your eligibility for car insurance. They see a low credit score as an indication of your accident potential, as well as the likelihood of your insurance lapsing for non-payment.
We recommend putting your auto insurance policy on an automatic payment plan to avoid the chance of a policy cancellation for non-payment. Also, most carriers will offer a discount when you opt for automatic monthly payments.
The practice of using your credit score to influence your auto insurance premium is no longer allowed in California, Hawaii, or Massachusetts.
4. You Have Had a Lapse in Insurance Coverage
Going without auto insurance coverage for a period of time will automatically increase your risk level with insurance companies. A lapse in coverage can occur if your insurance company cancels your policy and you don’t secure a new one, or because you fail to pay your auto insurance premiums on time.
Driving without insurance is also against the law in most states and the penalties, if caught, may include jail time, fines, license suspension, and possibly the impounding of your car. For this reason, insurers may be unwilling to take a chance on you, disqualifying you for car insurance.
5. You’ve Filed Too Many Claims
When you own a car, there should always be an expectation that one day, something might happen, and you’ll need to contact your insurance company to file a claim. Even the most responsible drivers can find themselves involved in an accident or experience damage to their vehicle. However, if you have a history of filing numerous auto insurance claims in a short period of time, you may be flagged as a high-risk liability and denied coverage.
Because insurance companies weigh your history in determining your eligibility for insurance, the number of claims you file, no matter how large, weigh heavily on your chances of getting approved.
6. You’ve Received Multiple Traffic Violations
Avoiding traffic violations is a must if you want to increase your chances of being approved for car insurance. If you have racked up a collection of tickets for speeding, following too closely, running red lights, unsafe lane changes, or other moving violations, insurance companies will probably deny your car insurance application.
Quite frankly, insurers view this type of behavior as reckless and irresponsible and they are just not willing to take a chance that you will cost them money.
7. You’ve Been Involved in an At-Fault Accident
Being involved in a car accident is stressful and can happen to anyone anytime. Nevertheless, if you’ve been involved in accidents that you caused, especially multiple accidents in a relatively short period of time, you could very well be denied auto insurance coverage.
Insurance companies use precise calculations to ascertain your potential for risk based on varying components like your age, how long you’ve been driving, the make and model of your vehicle, where you live, your credit score, and your driving history.
When the above elements determine your insurability, auto insurance carriers give more weight to some over others. Being found responsible for car accidents can outweigh other positive aspects of your driving history and patterns.
8. You’ve Been Convicted of a DUI/DWI
If you have even a single conviction for driving under the influence of alcohol or drugs or driving while intoxicated it will immediately catapult you into the high-risk driver category. A DUI or DWI on your driving record can have costly and long-lasting effects. One of which is the difficulty you’ll likely face in attempting to insure your vehicle.
9. You Have a High-Value or Specialized Vehicle
Owning a sports car or exotic high-end luxury vehicle like a Ferrari or Bentley may create a struggle in finding car insurance. Sports cars are known for their speed and power which can very easily cause you to rack up traffic tickets and car accidents.
High-priced luxury vehicles may not carry the same risks of excessive power and speed as a sports car, but owning one also has its disadvantages. Because these vehicles are usually handcrafted with expensive, custom parts, even a simple fender-bender can cost an excessive amount to repair.
With a high risk of theft or vandalism, rare and expensive repair parts, and a higher risk of damage, most insurance companies are unwilling to approve car insurance policies for these types of vehicles that create excessive liability exposure.
10. Where You Live
Believe it or not, where you reside can make you a high-risk driver, especially if the territory you live in has a history of losses from theft and vandalism. These areas are often densely-populated metropolitan areas with high crime rates.
Insurance companies look closely at statistical data to assess your risk factor. The higher the risk, the less likely you will be approved for coverage.
How to Find High-Risk Insurance
Although some insurers do not offer high-risk car insurance coverage, here’s a list of companies that do:
The insurance companies above are just a few known to insure high-risk drivers, but you must research and apply for coverage. This is your best bet to get approved for car insurance.
What Can I Do if I Can’t Get Approved?
If you have exhausted the car insurance application process and still can’t get approval, your options are limited, but there is hope. First, know that your “high-risk” status does not have to be permanent.
Next, identify areas you can control to increase your chances of getting your application approved in the future. Here are some things to get you started:
- Speak with an Insurance Agent. If you’ve been shopping around for car insurance online and have been denied, it may be a good idea to speak with an insurance agent. The insurance agent can review your car insurance application and let you know your options and what steps you need to take to get your application approved.
- Join an Assigned Risk Pool. Some insurance companies volunteer to participate in a state-assigned risk pool that offers insurance to drivers, regardless of their driving record. Assigned risk pools make sure every driver is insurable, but obtaining your car insurance through an assigned risk pool carrier is inevitably very expensive and may limit the type of coverage that you are eligible for.
- Improve Your Driving Record. Follow and obey all the road rules to avoid additional tickets, accidents, and irresponsible driving practices.
- Take a Defensive Driving Course. Brush up on your driving skills and offset the number of negative points and infractions on your record. Keep in mind that while doing so can reduce the points on your license, it doesn’t remove the violation from your driving record. All violations are taken into consideration by insurance companies.
- Repair Your Credit. Contact the three major credit reporting agencies: Equifax, TransUnion, and Experian, and request a copy of your credit report. Carefully review it for errors, omissions, old information, etc. If you locate any discrepancies, file a dispute to have each item in question investigated.
- Don’t Drive Without Insurance. Do not risk getting caught driving or being involved in a car accident without insurance. Instead, use ride-sharing companies like Uber or Lyft or use public transportation. You can also ask friends and family for rides.
Taking the necessary steps to increase your approval odds is a positive step toward changing your at-risk driver status. Check back with insurance companies often to see if your situation has improved and if you can secure less-expensive or better auto insurance for your vehicle.
Also, while you can expect to pay more for your auto insurance as a high-risk driver, it’s still important to compare rates to find the best price.
At Compare.com, we make it easy. Use our auto insurance comparison tool to find the most affordable coverage, no matter your background.
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Frequently Asked Questions About High Risk Car Insurance
Can I join my parents’ insurance policy if my individual application is denied?
If you reside at home with your parents or are a college student who lives away from your parents’ house, you may be able to be added to their car insurance. However, keep in mind that most states will require that the vehicle is registered in one of your parents’ names in order to insure it on their policy. If your vehicle is registered in your name only, you will need to secure an auto policy in your name.
Will my insurance consider me a high-risk driver and cancel my car insurance because of my reckless driving ticket?
Yes, in most cases. A reckless driving violation is akin to a DUI or DWI in the eyes of insurance companies. It’s considered a major driving violation, which will cause a carrier to non-renew your auto insurance policy if they discover it on your record.
However, they must notify you of any impending policy changes, including cancellations, ahead of time to allow you enough time to secure a replacement policy..
What happens if I drive without car insurance?
Driving without insurance is against the law, and the financial and legal ramifications can be catastrophic. You may face jail time, pay exorbitant fines and legal fees, have your driver’s license suspended, or have your vehicle impounded.
How long will I be considered a high-risk driver?
The underwriting period for insurance companies is typically 3 or 5 years. You can’t remove the violations you have by driving more carefully or enrolling in a defensive driving course. It takes time.
How often should I apply for new insurance?
If your car insurance application has been denied by one company, you must shop around to find an insurance company that may approve you for coverage.
If you have been denied a high-risk insurance policy, take the necessary steps to increase your approval odds in the future. Clean up your credit, driving history, etc. Then, re-apply every six to twelve months.
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