Understanding Auto Insurance Denial: What You Need To Know

There are many reasons why someone may be denied auto insurance. Insurance companies are in the business of risk, and they are likely to turn down drivers they consider too risky. This can happen due to a poor driving record, including multiple traffic tickets or violations, or a history of accidents, especially those that are deemed to be your fault. Teen drivers and drivers over 70 may also be considered high-risk. Your location can also be a factor, as can the type of car you drive. If you live in an area with high crime rates or drive an expensive or high-performance car, you may be denied auto insurance. Another common reason for being denied auto insurance is credit score, as insurance companies in most states can consider this when determining rates.

You have a history of traffic violations and accidents

If you have a history of traffic violations and accidents, it's likely that insurance companies will consider you a high-risk driver. This label can make it difficult to obtain auto insurance coverage, as insurers are in the business of risk management and are hesitant to insure drivers who are deemed more likely to file a claim.

Multiple minor traffic violations, such as speeding or failing to come to a complete stop, can accumulate on your driving record and gradually increase your insurance rates. Major violations, including driving under the influence (DUI) or reckless driving, will result in legal repercussions and significantly impact your insurance costs. For example, a DUI can double or even triple your insurance premium, depending on your state and insurer. These offenses often remain on your driving record for years, affecting your insurance rates for an extended period.

Additionally, many states use a point system to track driving violations and infractions. As you accumulate points, insurance companies view this as an indication of risky driving behavior, which further increases your insurance premiums. While some states offer ways to reduce points, such as by completing a defensive driving course, the best strategy is to avoid accumulating points in the first place.

The impact of traffic violations on your insurance rates is not permanent but can be long-lasting. The duration depends on the severity of the violation and the insurance provider's policies. Typically, minor violations can affect your rates for three to five years, while major violations can impact your rates for five years or more.

To improve your chances of obtaining auto insurance with a history of traffic violations and accidents, consider the following:

• Improve your driving record over time by avoiding new violations. The more time that passes since your last violation, the lower your insurance quote is likely to be.
• Take a defensive driving course to reduce the number of points or infractions on your license and possibly qualify for an automatic discount on your insurance rates.
• Contact multiple insurance companies and compare quotes, as each company evaluates applications differently, and you may find one that is more accommodating of your driving history.
• Consider a high-risk insurance company, also known as a non-standard insurer, which specializes in providing insurance to drivers with poor driving records. However, keep in mind that these companies typically charge higher rates.
• Get added to a family member's policy, but ensure that you have a trustworthy relationship, as you'll both be responsible for each other's driving behavior and its potential impact on insurance rates.

You drive a high-performance vehicle

If you're being denied auto insurance, it could be because you drive a high-performance vehicle. Insurance companies consider high-performance vehicles to be a higher risk for insurance coverage. This is because these vehicles are often more expensive and powerful, making them more attractive to thieves and resulting in costlier repairs in the event of an accident. As a result, insurance companies may charge higher premiums or deny coverage altogether to mitigate their potential losses.

When it comes to auto insurance, insurance companies are in the business of managing risk. They use various factors to assess the likelihood of a driver filing an insurance claim. If they deem the risk too high, they may refuse to offer coverage. In the case of high-performance vehicles, insurance companies consider the increased risk of theft and higher repair costs as significant factors in their decision-making process.

If you find yourself in this situation, there are a few steps you can take to secure auto insurance coverage:

• Shop around and compare quotes: Different insurance companies have different risk thresholds and criteria for coverage. By shopping around and comparing quotes from multiple providers, you may find an insurer willing to offer you coverage at an acceptable rate.
• Consider high-risk insurance companies: If standard insurance companies are unwilling to provide coverage, you may need to turn to high-risk or non-standard insurance providers. These companies specialise in insuring high-risk drivers and vehicles, but their policies tend to be more expensive.
• Join a state-assigned risk pool: Many states have assigned risk pools where auto insurers voluntarily participate. Each insurer in the pool must accept the motorists assigned to them by the state. While the premiums are typically higher, this option provides coverage regardless of your driving history or vehicle type.
• Improve your risk profile: Work on improving your risk profile by taking a defensive driving course, maintaining a clean driving record, and improving your credit score. Over time, insurance companies may view you as a lower-risk client and be more willing to offer coverage.
• Get added to someone else's policy: If you're a new driver or live with family members who have an insurance policy, you may be able to get added to their policy for coverage. This can be a more affordable option, but it's important to ensure that your driving doesn't negatively impact their insurance rates.
• Consider changing your vehicle: If you're unable to secure affordable coverage for your high-performance vehicle, you may want to consider selling it and purchasing a vehicle that is less powerful or expensive. This could make it easier to obtain insurance coverage.

Remember, each insurance company evaluates applications differently, so don't get discouraged if one insurer denies you coverage. Keep shopping around, compare quotes, and explore your options to find the right coverage for your high-performance vehicle.

You live in a high-crime area

If you live in a high-crime area, you may be denied auto insurance coverage. This is because insurers believe that you are a high-risk driver and your car has a higher risk of being vandalised or stolen. The increased possibility of body damage, stolen car parts, or an entire stolen car can make insurers turn you away.

Insurers have long defended their pricing by saying that the risk of accidents is greater in those neighbourhoods, even for motorists who have never had one. However, this has been challenged by a recent analysis by ProPublica and Consumer Reports, which found that many of the disparities in auto insurance prices between minority and white neighbourhoods are wider than differences in risk can explain. In some cases, insurers were charging premiums that were on average 30% higher in zip codes where most residents are minorities than in whiter neighbourhoods with similar accident costs.

If you are denied coverage by a standard carrier due to living in a high-crime area, you might want to contact high-risk insurance companies, which have different underwriting guidelines and may be more likely to offer you coverage. You could also consider asking a family member to add you as a driver to their policy, although this may only be an option if you live with them.

You have a poor credit score

A poor credit score can be a reason why you are denied auto insurance. In most states, insurance companies can consider your credit score when determining rates and eligibility. A low credit score is associated with a higher likelihood of filing a claim, so insurance companies often charge higher rates to those with poor credit.

If you have a poor credit score, there are several steps you can take to improve your chances of getting approved for auto insurance. Firstly, get quotes from multiple insurance companies, as each company considers factors like credit score differently. You may also want to work with an insurance agent who can submit your application to multiple companies at once. If you are unable to get approved by a standard carrier, consider contacting high-risk insurance companies, which have different underwriting guidelines and are more likely to accept high-risk drivers.

In the meantime, you can take steps to improve your credit score. Pay your bills on time, keep your credit utilisation ratio low, and dispute any errors on your credit report. Repairing your credit can take time, but it can significantly impact your ability to qualify for auto insurance, as well as loans and credit cards.

Additionally, keep in mind that some states prohibit insurance companies from denying coverage based on credit score. For example, California, Hawaii, Massachusetts, and Michigan ban the use of credit scores in determining car insurance costs. Maryland also prohibits the use of credit history for insurance renewals, cancellations, and increases in costs. Therefore, it is important to be aware of the specific laws and regulations in your state regarding the use of credit scores in insurance decisions.

You have a lapse in coverage

A lapse in auto insurance coverage can occur for several reasons, including between the date your insurance is cancelled and the date your new insurance starts, you surrender your vehicle plates, your registration expires, or your insurance company reinstates your coverage. Even a short lapse in coverage can have serious consequences.

Firstly, if you have a lapse in coverage, your vehicle is no longer insured, meaning that if you cause an accident and injure someone or damage their car, you will have to pay for everything out of pocket. This could be an enormous and life-changing expense, and the other driver could take legal action, which could cost you money or future wages.

Secondly, the department of motor vehicles in your state may be notified that you are without insurance, and they can suspend your license or fine you. In New York, for example, if there is a lapse of insurance for a vehicle registered to you, the DMV can suspend your registration and driver's license. If the registration suspension period is more than 90 days, you must surrender your vehicle registration and plates, and your driver's license will be suspended for the same number of days as your registration suspension. You will also have to pay a $50 license suspension termination fee to reinstate your driver's license.

Thirdly, even one day without coverage can result in a higher car insurance rate, as starting a new policy is usually more expensive than staying continuously insured. At Progressive, for example, you may not be eligible for their Continuous Insurance Discount if you have gone more than one month without insurance.

Finally, your vehicle could be repossessed by your lending or leasing company, as most lenders require comprehensive and collision coverage on the vehicle as part of the terms of the loan or lease.

If you have had a lapse in coverage, you should call your previous insurance company and find out if your coverage has lapsed and, if so, how long you have been without car insurance coverage. If your policy has been cancelled, ask if it can be reinstated, meaning that you'll maintain continuous insurance with the policy you had previously. If it cannot be reinstated, you should buy a new auto insurance policy right away, as you need to be insured before you drive.

Frequently asked questions