High Risk Auto Insurance: How do Insurance Companies Define High Risk?

Regarding auto insurance, being considered “high risk” can mean different things, depending on the insurance company. In general, high risk pertains to the exposure insurance companies face with certain types of drivers. Considering them to be high risk means, based on claims experience, they’re more likely to have a chargeable accidents and / or moving violations than “clean” drivers and the insurance company will rate them accordingly for this exposure. This typically means higher premiums.

Insurance companies often view newly licensed drivers, young people, drivers over the age of 70, drivers with bad credit and individuals with a history of insurance claims as high risk (or substandard). These exposures are in addition to the usual suspects: Drivers with DUI’s and multiple moving violations. Some companies even view drivers as high risk based on the cars they drive. If you’re looking to insure a modified car, an expensive sports car or something that’s been “souped up”, it’s possible the insurance company will view that risk as high risk and you’ll pay higher rates for the coverage.

High risk insurance (or non-standard insurance) has become more common in recent years due to growing numbers of high risk drivers on the road that can’t be insured by traditional insurance companies. The reason for is largely because of tougher drunk driving laws during the last decade. According to Mothers Against Drunk Driving (MADD), in 2005, 16,885 people were killed accidents involving alcohol. That’s approximately one death every half hour. Of these, 12,945 involved a driver with an illegal blood alcohol concentration (BAC) of .08% or greater. Nine percent of these fatalities involved a driver that had been previously convicted of driving under the influence (DUI).

Because of increasing amounts of drivers being considered high risk, smaller, lesser known insurance companies have been entering the insurance business, many of these companies specialize in non-standard insurance. Often these smaller companies have significantly lower rates than traditional insurance companies, partially due to lower operating costs they incur as a result of not having bricks and mortar offices in the communities they service. Typically, one can find these companies on the internet and most business transactions can take place that way. While it’s possible to find a high risk policy with a larger, traditional insurance company, often, they’ll charge more and some companies won’t be able to insure you at all and you’ll have to shop elsewhere.

Most states offer an assigned risk program for substandard drivers. This program matches high risk drivers who, due to their driving history, have been unable to find coverage in the voluntary market. Generally, every insurance company that operates in these states must participate in the assigned risk program and follow the plan. Often, the high risk consumer must exhaust all possibilities of finding coverage in the voluntary market before becoming eligible for assigned risk insurance. While these policies are not necessarily inexpensive, they may be the high risk driver’s only solution to finding insurance. Check with your states motor vehicle department, or your insurance agent, regarding assigned risk options in your area.