Auto Insurance: Lost And Found

There are many reasons why you might be struggling to find auto insurance. Insurance companies are risk-averse and tend to shy away from providing insurance to drivers they deem high risk. This could be due to a poor driving record, owning a high-performance or expensive vehicle, living in an area with a high crime rate, or having gaps in insurance coverage. If you are unable to get car insurance from a traditional company, you can try a state's assigned risk pool or a private insurance company that writes high-risk insurance, often called a non-standard company. These options tend to be more expensive, so it's worth shopping around and comparing quotes from multiple insurers.

High-risk drivers

If you're a high-risk driver, you may find it difficult to get car insurance. High-risk drivers are generally considered to be those with a poor driving record, including speeding tickets, at-fault accidents, DUI/DWI convictions, and lapses in insurance coverage. Other factors that can contribute to being labelled a high-risk driver include age, credit score, location, and type of vehicle.

Options for High-Risk Drivers

• Join a state-assigned risk pool: Auto insurers voluntarily participate in state-assigned risk pools, where each insurer must accept the motorists assigned to them by the state. While premiums are significantly higher than standard insurance, these pools provide coverage regardless of the driver's history.
• Get a policy from a "high-risk" specialist insurer: Some private insurance companies specialize in "non-standard" policies for high-risk drivers, such as those with bad accident records, high-performance cars, or those living in high-risk areas. These insurers may offer more comprehensive coverage than state-assigned risk pools.
• Improve your risk factors: Taking steps to lower your risk profile, such as improving your driving record and credit score, can help you qualify for standard insurance coverage in the future.

Best Insurance Companies for High-Risk Drivers

According to Bankrate, the following companies offer competitive rates and solid coverage options for high-risk drivers:

• Allstate Insurance: Offers SR-22 filings and discounts for early signing, responsible payment, and safe driving habits.
• Amica Insurance: Stands out for high claims satisfaction scores and competitive rates for drivers with tickets or accidents. Offers a legacy discount for younger drivers whose parents have been customers for over five years.
• Geico Insurance: A good choice for high-risk drivers after a DUI conviction, with average premium increases that are generally lower than the national average.
• Progressive Insurance: A popular choice for high-risk and young drivers due to lower average rates for DUI and SR-22 filings. Offers various discount options and a Name Your Price tool to find coverage within your budget.
• State Farm Insurance: The largest writer of auto insurance policies in the US, offering local agents and digital resources to navigate coverage options. Provides potential discounts for bundling, good students, defensive driving courses, and telematics programs.

Tips for Lowering Your Risk Profile

• Take a defensive driving course: Learning safe driving skills can help you avoid accidents and improve your risk profile.
• Drive safely and obey traffic laws: Avoid accidents and tickets by driving diligently and obeying traffic rules.
• Avoid drinking and driving: Always have a designated driver when consuming alcohol.
• Improve your credit score: A better credit score can help lower your insurance risk and potentially reduce your premiums.
• Choose a safer vehicle: Driving a safer car can reduce the risk of accidents and injuries, which may be viewed positively by insurers.

Poor credit score

A poor credit score can be a significant barrier to finding affordable auto insurance. In most states, insurance companies are allowed to factor in credit history when determining rates, and a low score can lead to substantially higher premiums. This is because insurers believe that an individual's credit history is a good predictor of whether they will file insurance claims. In other words, those with poor credit scores are seen as higher-risk and more likely to file claims, which makes them more expensive to insure.

The impact of a poor credit score on insurance premiums can vary widely across states. In some states, a poor credit score could increase your insurance premium by over 100%. Additionally, a poor credit score could lead to fewer choices of insurance companies, as some insurers may be hesitant to provide coverage to individuals with lower credit scores.

However, there are a few things you can do to improve your chances of finding affordable auto insurance with a poor credit score:

• Improve your credit score over time by paying your bills on time, minimizing hard credit inquiries, regularly monitoring your score, maintaining old lines of credit, and keeping your credit utilization ratio low.
• Shop around and compare rates from multiple insurance companies, as some may be more accommodating of diverse credit histories than others.
• Consider insurers that specialize in high-risk consumers or "non-standard" policies.
• Look into state-assigned risk pools, where insurers are mandated to accept motorists assigned to them by the state, although premiums tend to be substantially higher.

Gaps in insurance coverage

Understanding Depreciation

When you buy a new car, it starts to depreciate in value immediately. This depreciation can leave a gap between what you owe on your loan or lease and the car's actual value. Standard auto insurance policies typically only cover the depreciated value of the vehicle, leaving you with a financial burden if it is damaged or stolen.

The Role of Gap Insurance

Gap insurance, or Guaranteed Auto Protection (GAP), is an optional coverage that bridges the financial gap when your car loan balance is higher than the car's worth. It is designed to protect you from depreciation and ensure you don't owe more than the car is worth. Gap insurance covers the difference between the depreciated value of the car and the loan amount owed if it is involved in an accident or stolen.

When to Consider Gap Insurance

Gap insurance is particularly important if:

• You made a small down payment (less than 20%) on your vehicle.
• You have a long financing term (60 months or more).
• You leased your vehicle (gap insurance is often required in this case).
• You purchased a vehicle that depreciates faster than average.
• You rolled over negative equity from an old loan into the new one.

When You May Not Need Gap Insurance

On the other hand, you may not need gap insurance if:

• You made a substantial down payment (20% or more) on the car.
• You're paying off the car loan in less than five years.
• Your vehicle holds its value better than average.

Cost Considerations

The cost of gap insurance varies, but it is relatively affordable. According to the Insurance Information Institute, adding gap insurance to your comprehensive auto insurance policy can cost as little as $20 per year. However, rates charged by dealers and lenders are typically much higher, ranging from $500 to $700 for a gap policy.

In conclusion, understanding gaps in auto insurance coverage is crucial to ensuring you have adequate protection. By considering factors such as depreciation, the benefits of gap insurance, and your individual circumstances, you can make an informed decision about your coverage needs and protect yourself from financial losses.

High-performance vehicles

Because of their high performance, these cars are more expensive to insure. They are generally found in higher insurance groups, and the cost of insurance depends on the type of car, any modifications, and factors like the driver's age and location. High-performance vehicles are considered a higher risk to insure because they are more likely to be targeted by thieves and have a bigger impact in crashes. Their complex design means they often need specialist garages and their parts are more expensive to replace.

Specialist insurers can tailor cover to the specific costs and risks that come with high-performance cars. The insurance will provide benefits such as fully comprehensive cover for all named drivers, cover for fire and theft, cover for damage to the car and other vehicles, discounts for limited mileage, and cover for driving in Europe.

There are ways to reduce the cost of insurance for high-performance cars. These include keeping the mileage low, increasing security measures, adding an older, more experienced driver to the policy, and taking an advanced driving course.

High-risk areas

Insurers also consider your ZIP code when calculating your premium. Living in a state with onerous insurance regulations, such as Michigan or other no-fault states, can impact your premium regardless of your driving record.

Insurance companies also consider the number of miles you drive. Using your vehicle in high-density areas and driving more miles warrants a premium increase.

Frequently asked questions