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UPDATED: Mar 13, 2020
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Car insurance companies divide policyholders into different categories of risk in order to determine how much rates should cost. Preferred-risk drivers are those who have the lowest chance of being involved in auto accidents and pay the lowest rates. Most people do not qualify for this top-tier of insurance and are classified instead as standard-risk drivers. These are individuals who may have been involved in a small number of collisions throughout their lifetime or who have had a few traffic violations. The final and most expensive category of risk is high-risk; these drivers pay more than anyone else for auto insurance and have the most difficult time procuring insurance coverage.
Fortunately, it’s not impossible to find insurance as a high-risk driver, and some companies offer affordable policies to people despite their bad driving records. High-risk drivers can also take steps to improve their driving habits and move to lower risk categories, enabling them access to more affordable premiums and a wider variety of companies to choose from.
What Categorizes a Driver as High Risk?
Car insurance companies assess an individual driver’s personal information, statistical data, geographic information and numerous other factors when determining the cost of a policy. The insurance industry is extremely interested in statistics, and they review studies each year about various populations of drivers in order to accurately assess driving habits.
Due to discrimination laws, drivers cannot experience rate increases due to race or religion. They can, however, have their rates be affected by age, gender and marital status. These statistical factors will have less bearing on a driver’s insurance costs than their personal driving history.
Different insurance companies will weigh various factors differently. For example, a single accident may cause a higher rate increase for one company than for another. Aside from car accidents, there are several other factors that can lead to a driver being categorized as high risk:
— Traffic violations, tickets or citations
— DUI convictions
— Inexperienced drivers
— People whose previous insurance policy was canceled
— Drivers between 16 and 25 years of age
— Drivers with bad credit
Teenagers, especially teenage males, pay more for car insurance than any other group of people. This is because male teenagers are involved in more auto accidents than any other demographic, and auto accidents are the leading cause of death for people that age.
How Much Do High Risk Drivers Pay for Insurance?
The exact cost of auto insurance premiums varies from one company to the next, and no two drivers will pay exactly the same premiums. They will generally pay two to three times the amount of a preferred-risk insurance policy, although this is by no means a hard-and-fast rule.
Other factors that affect the cost of insurance for high-risk drivers include the state the policy is sold in, the type of vehicle being insured and the coverages carried on the policy. In other words, two people with the exact same driving history may still have different rates with their insurer due to differences in these factors.
If you were a very safe driver and were moved into a high-risk category due to an accident or citation, your rates may increase substantially more than you would expect. This is not because the base rate for insurance is higher; rather, it occurs when you lose a discount that caused your rates to decrease. The loss of a safe driving discount is often worse than the actual rate increase.
What Else Happens to High-Risk Drivers?
Sometimes, insurance companies cancel policies rather than increasing their rates. This occurs whenever a person’s risk level rises significantly, such as following a very expensive auto accident, multiple accidents in a single year or a DUI conviction. When this happens, the insurance company will issue a letter to the insured letting them know that the policy has been canceled and why.
After a policy has been canceled, it can sometimes be difficult for the insured to find a new policy. Some companies will refuse to insure people who are very high risk. Because you cannot drive a vehicle without insurance, this can be a massive inconvenience to some people. Fortunately, options are available for drivers who are unable to obtain regular auto insurance due to their risk category.
High-Risk and Assigned Risk Policies
Drivers who cannot obtain a policy through a regular insurance company can purchase their insurance through a carrier dedicated to providing coverage to high-risk drivers. These companies often specialize in direct sales as a way to reduce their operation cost, so you may be able to purchase the policy online through their website. The rates through these companies may even be lower than the high-risk rates with other insurance companies due to their reduced costs of operation.
For the highest risk drivers, states employ what’s called an “assigned risk” policy. This requires all insurance companies to pool their resources and underwrite insurance for people who are unable to obtain coverage any other way. These policies will be handled through a single company, but the funds for claims will be paid by another company or combination of companies.
People with assigned risk insurance policies have limitations placed upon them. They cannot carry more than very basic coverage, and they can only obtain full coverage insurance if their vehicle is financed and the lien holder requires it. It may also take longer for these drivers to have their claims settled due to additional and more complex paperwork.
Improving Your Risk Category
Fortunately, categories of risk are a fluid concept and people are able to move between them over time by engaging in the appropriate behaviors. High-risk drivers can reduce the cost of their policies by engaging in safe driving habits; over time, their rates will begin to decrease. In the meanwhile, they can take advantage of any discounts they may be able to qualify for:
— Multi-policy discounts
— Good student discounts
— Discounts for advanced driver’s education courses
— Discounts for installing safety devices in a vehicle
Any negative point against a person’s driver’s license will only count against them for seven years. Beyond that point, their driving record is wiped clean and they will be able to enjoy lower premiums as long as they maintain safe habits.