Haris Ashley
A high-risk auto insurance policy is a type of car insurance for drivers who are considered more likely to file insurance claims than the average driver. Insurance companies may label someone as a high-risk driver if they have a history of accidents, traffic violations, or a lack of driving experience. High-risk drivers typically pay higher insurance premiums as they are considered greater liabilities by insurance providers.
| Characteristics | Values |
|---|---|
| Age | Drivers under 21 and over 65 are considered high risk |
| Driving experience | Lack of driving experience or a history of accidents or violations |
| Insurance history | Lapses in insurance coverage or no history of auto insurance |
| Credit history | Poor credit or no credit |
| Traffic violations | DUI, DWI, speeding, reckless driving, running a red light, improper turns |
What You'll Learn
High-risk age groups
Insurance companies consider several factors when determining whether a driver is high-risk, and age is one of the most significant. Younger and older drivers tend to be charged higher insurance premiums because they are more likely to be involved in accidents.
Teenagers and Young Adults
Teenagers and young adults are considered high-risk because they have less experience driving and are more likely to get into accidents. The crash risk for drivers aged 16-19 is almost three times higher than for drivers aged 20 and older. Male drivers in this age group are three times more likely to get into accidents than female drivers of the same age.
The cost of car insurance is highest for 16-year-olds, with an average annual cost of around $3,000 for minimum coverage and over $7,000 for full coverage. As young drivers gain experience and maintain good driving habits, their insurance rates gradually decrease. By the time they reach their mid-20s, their premiums should be significantly lower.
Seniors
Motorists over the age of 70 are also considered high-risk. Older drivers have a substantially higher car crash death rate than middle-aged drivers due to factors such as deteriorated vision and reaction times. Aging-related factors can make seniors more likely to get into accidents, leading to an increase in insurance rates. However, their rates are unlikely to return to the high levels of teen drivers if they maintain a clean driving record.
Middle-Aged Drivers
Middle-aged drivers, particularly those aged 45-55, usually pay the lowest rates for car insurance. They are considered lower-risk because they have more experience and lower accident and claims rates compared to teens and seniors.
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Driving record
A driver's record is a key factor in determining whether they are considered high-risk. A history of accidents, traffic violations, and other infractions can lead to a driver being labelled as high-risk and facing higher insurance premiums.
Accidents
At-fault accidents are a significant factor in assessing risk. Insurance companies view drivers with a history of at-fault accidents as more likely to be involved in future accidents, leading to higher insurance costs. These accidents can also result in points on a driver's license, which further contributes to the high-risk classification. In California, for example, accumulating four points in a year may result in a license suspension.
Traffic Violations
Traffic violations, such as speeding, running red lights, or driving under the influence (DUI/DWI), are red flags for insurance companies. Multiple speeding tickets within a year or a single DUI conviction can significantly increase insurance rates. A DUI conviction may also require the driver to obtain an SR-22 certificate, which verifies they meet the minimum financial responsibility requirements to drive.
Moving Violations and Serious Offenses
Moving violations, such as running stop signs or failing to yield, can contribute to a high-risk designation. More serious offenses, like road rage incidents, hit-and-run accidents, or excessive speeding, will also result in higher insurance premiums and may even lead to license suspension or revocation.
Number of Infractions
The number of infractions within a certain period is crucial. While a single speeding ticket may only lead to a moderate increase in insurance rates, multiple speeding tickets or other violations in a short period will likely result in a high-risk classification and higher premiums.
Length of Time on Record
The length of time that accidents, violations, and convictions remain on a driving record varies. Typically, traffic violations like speeding stay on a record for 3-5 years, while more serious violations like DUI convictions or at-fault accidents may be considered for five years or more, depending on the state and insurance company.
Impact on Insurance Costs
High-risk drivers often face significantly higher insurance costs. For example, a driver with a DUI conviction in California may see their average annual rate for full coverage increase to $6,554, nearly triple the rate for a driver with a clean record. Multiple speeding tickets or moving violations can result in a 35% increase in insurance rates.
Lowering High-Risk Status
Improving one's driving record is crucial to lowering high-risk status. Adopting safer driving habits, such as obeying speed limits and avoiding accidents and violations, is essential. Completing a defensive driving course or a driver safety course can also help demonstrate a commitment to safe driving and may result in insurance discounts or the removal of "points" from a driving record.
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Lapses in insurance coverage
Insurance companies consider drivers with lapsed coverage to be high-risk. This is because they view drivers with continuous insurance coverage as more responsible and less likely to file claims. When a driver's insurance coverage lapses, they may find that their premiums increase when they try to purchase a new policy. This is because insurance companies see drivers with lapsed coverage as more likely to be in an accident or commit traffic violations.
The impact of a lapse in coverage on insurance rates can vary depending on the length of the lapse and the driver's history. If a driver has a history of accidents or violations, a lapse in coverage may further increase their risk profile and result in higher premiums. On the other hand, if a driver has a clean record and can provide a valid reason for the lapse, the impact on their rates may be minimal.
It's important to note that the impact of a lapse in coverage on insurance rates is not permanent. If a driver can maintain a clean driving record and consistently demonstrate safe driving behaviour, their insurance rates may decrease over time. Additionally, some insurance companies may offer discounts or incentives to drivers who have lapsed coverage if they complete a defensive driving course or maintain a certain number of violation-free years.
To avoid lapses in insurance coverage, it is important to stay on top of policy renewal dates and keep your insurance provider updated with any changes in your driving habits or circumstances. If you know you will not be driving for an extended period, it may be worth discussing options with your insurance provider rather than simply letting your policy lapse.
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Poor credit history
A high-risk auto insurance policy is a special type of policy reserved for drivers who are deemed more likely to cause an accident and file a claim. While there is no standard definition of a "high-risk driver", insurance companies consider various factors when determining a driver's risk level, including their driving record, age, credit history, and vehicle type. One of the factors that contribute to a driver being labelled as high-risk is a poor credit history.
A poor credit history is considered a red flag by insurance companies, as it indicates a higher likelihood of filing a claim. This is because individuals with a poor credit history are statistically more likely to file insurance claims, and insurers compensate for this increased risk by charging higher premiums. In fact, drivers with poor credit may pay up to 69% more for their auto insurance policy than those with good credit.
Insurers use credit-based insurance scores to evaluate an individual's credit history, and while each company has its own proprietary formula, common factors include outstanding debt, credit history length, credit mix, payment history, and the pursuit of new credit.
Improving a poor credit history can take time, but it is worth the effort to ensure drivers are getting the lowest possible rates for their auto insurance. Paying bills on time, minimizing hard credit inquiries, regularly monitoring credit scores, maintaining old lines of credit, and keeping a low credit utilization ratio are all strategies that can help improve credit-based insurance scores over time.
While a poor credit history can impact auto insurance rates, it is important to note that it is just one of several factors considered by insurers. Driving record, age, vehicle type, and other factors also play a role in determining insurance premiums.
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Serious driving violations
One of the most serious violations is driving under the influence (DUI) or driving while intoxicated (DWI). A DUI/DWI conviction can lead to a significant increase in insurance rates, sometimes doubling or tripling the average premium. In some states, a DUI/DWI may remain on a driving record for up to 10 years, and drivers may be required to obtain an SR-22 certificate, which verifies they meet the minimum financial responsibility requirements.
Other serious driving violations include road rage incidents, hit-and-run accidents, and excessive speeding. These types of violations can also result in a driver being categorised as high-risk and facing higher insurance premiums. Speeding tickets, in particular, are considered serious by insurance companies and can significantly affect insurance rates. The more speeding tickets a driver accumulates, the higher the increase in insurance rates is likely to be.
At-fault accidents are another factor that insurance companies consider when assessing risk. Accidents resulting in injuries, property damage, or fatalities can lead to substantial increases in insurance rates and may remain on a driving record for several years. Additionally, drivers with multiple comprehensive claims may also be viewed as high-risk.
It's important to note that the impact of serious driving violations on insurance policies can vary depending on the specific insurer, state regulations, and the driver's overall record. Some insurance companies may be more lenient than others, and certain states may have stricter requirements for high-risk drivers. As a result, it's advisable for drivers with serious violations to shop around and compare quotes from multiple insurance providers to find the most suitable coverage and rates.
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Frequently asked questions
High-risk auto insurance, also known as non-standard insurance, is a type of insurance policy for drivers who are considered more likely to be involved in an accident and file a claim than the average driver.
There are several factors that may lead to someone being considered a high-risk driver. These include:
- Age (drivers under 21 or over 65)
- Lack of driving experience
- History of accidents or violations
- Poor credit
- Lack of insurance coverage
High-risk drivers typically pay higher premiums than low-risk drivers, with rates increasing by as little as 4% or as much as 165%. The exact cost will depend on the driver's specific circumstances and their location.
High-risk status typically lasts for 3 to 5 years, after which time the remarks may be removed from your driving record if you maintain a clean record.
