What is a high-risk driver?

Emmet Pierce

If you're concerned about keeping your car insurance premiums low, you should do everything you can to avoid being classified as a high-risk driver by your insurance company.

If you've had numerous accidents and traffic tickets or committed a serious driving offense such as driving while drunk, you may be unable to purchase insurance on the commercial market. Because most states require motorists to have car insurance, departments of motor vehicles typically send these drivers to assigned-risk car insurance pools.high risk driver

That's bad news, since the premiums can be more than twice the amount they would be for standard car insurance. Also, you may be classified as a high-risk driver for a number of years.

"You have to stay (in the high-risk program) until you can prove that you're able to drive safely" says Pete Moraga, spokesman for the Insurance Information Network of California.

How to determine if you're a high-risk driver

Before selling you a car insurance policy, insurance underwriters routinely check your driving record to determine the risk you represent. Each insurer has its own methods, says Michael Barry, a spokesman for the nonprofit Insurance Information Institute (III). They generally place drivers in one of the following three categories.  

  1. Preferred drivers. These motorists receive the lowest rates because they typically have clean driving records with no traffic citations.
  2. Standard drivers. These drivers have good driving records, but may have received some traffic citations.
  3. Nonstandard drivers. These drivers represent a higher-than-average risk to insurers because of numerous citations or traffic accidents, but remain insurable.

Be sure to ask your insurer what category you fall into and how this affects your insurance premiums. Most insurance companies are happy to explain your policy in detail, Moraga says.

Because each insurer has its own methods of setting rates, the price you pay for the various types of policies can vary greatly from one insurer to another, says Jim Armitage, an insurance agent in Arcadia, Calif.

The rates you pay for a nonstandard driver policy easily can be double the cost that a preferred driver pays, he adds. A standard policy typically is 20 percent or more than a preferred policy.

If you can't find an insurance company that’s willing to sell you a nonstandard auto policy because you’re a high-risk driver, you may be sent to your state's assigned risk pool. Insurers typically are required by state law to insure high-risk drivers who otherwise would not be able to buy policies.

According to the III, all states have assigned risk pools. Insurance companies generally are given a share of the state's high-risk drivers that’s based on the number of auto insurance policies they sell.  Typically, you must be declined for a nonstandard commercial policy in order to become part of an assigned risk pool.

"Once you're in it, it is not an easy task to get out of it," says David Cather, an associate professor of risk management at Pennsylvania State University.

It often takes drivers several years to improve their driving records enough to find an insurer who will issue them a commercial policy, he adds. 

Cather recommends doing all you can to avoid being sent to an assigned risk pool. The first step is to drive defensively and obey all of the rules of the road. If you feel you've received a traffic citation unjustly, you should contest it, he adds. Any legal costs you face when contesting a citation are likely to be offset by car insurance savings if you overturn the citation. 

Other factors that lead to higher premiums

In addition to having a bad driving record, there are other factors that may lead insurers to consider you a high risk. They may not cause you to be placed in an assigned risk pool, but they can raise your car insurance premiums.

  • The type of car you drive. Barry says certain of types cars -- including sporty cars with powerful engines or vehicles with high repair costs -- can lead to greater insurance premiums. Insurers keep track of makes and models that have a history of costly insurance claims.
  • A low credit score. Although you can't be denied insurance for a poor credit score, it can be used as a factor in determining what an insurance company decides to charge you. Insurers cite research that says people with poor credit records are more likely to file car insurance claims. Only three states -- California, Hawaii and Massachusetts -- prohibit insurance companies from using credit records as a factor for setting auto insurance rates.
  • A job that requires you to spend time behind the wheel. People who drive as part of their jobs, such as long-distance truck drivers, may be penalized by car insurance companies. More time on the road increases your chance of having an accident.  
  • Youth and inexperience. It may not seem fair, but insurance underwriters consider you to be at high risk of filing car insurance claims if you are a young and inexperienced driver.

How to reduce your car insurance premiums

Most car insurance companies will forgive your accidents and poor driving history if you maintain a clean driving record for at least three years, Barry says. If you’re able to avoid traffic tickets and accidents, your premiums gradually will fall.

Derek Ross, President of Kulchin Ross Insurance Services located in Tarzana, Calif., says people generally start driving better once they are financially penalized for their mistakes. Getting placed into an assigned risk insurance pool often is all the motivation drivers need to start driving more carefully.

"People who are classified as high-risk drivers tend to tighten up their skills and become better drivers, because they don't want to pay higher premiums," he says.

Once you have been assigned to a high-risk pool, you should periodically check with insurance companies to see if you can purchase standard insurance for a lower fee, Ross says. "If you’re a high-risk driver, it makes sense to shop for a policy every year."

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