Assigned risk is a term used by insurers to describe the group of people they are required by law to insure, even though their usual procedures would make those people ineligible for car insurance.
Risky or At-Risk Drivers
Both automobile insurers and the state have groups of drivers they describe as risky or at risk.
These drivers are difficult to insure, or are a risk the insurance companies don't want to take, because they engage in behavior that is expensive to insurance companies. This includes drinking and driving (DUI convictions), many accidents or a high number of tickets.
Although the state and the insurance companies may have different ways of defining risky drivers, they have similar criteria.
Each state, often through the motor vehicle division (Department of Motor Vehicles in many states), pools the group of at risk drivers, and assigns a certain number of these to individual insurance companies.
The car insurance companies are required to insure these drivers, although they may charge higher premiums and have different conditions than other drivers with better records might have.
Each state has different criteria for determining at what point you are put in the assigned risk pool, but generally if you have applied for coverage three times from a standard insurer, and have been turned down three times, then you fill out an application for the assigned risk pool in your state.
Certain environmental or social factors could also dictate cancellation or denial of standard auto insurance. Those who live in a bad neighborhood with a high incidence of crime, auto theft and vandalism could also result in denial when trying to renew an insurance policy.
Although being in the assigned risk pool is an avenue of last resort, it does at least give an option to those who would otherwise be denied coverage.
What is the Pool?
There is a limit to how long drivers spend in the "pool," but in order to qualify, you have to submit the correct application form, and prove you have no other option because you have been refused insurance. Basically, you will then be assigned to an insurance provider, who is more or less ordered to cover you. State requirements vary, but usually a driver will only be allowed to buy the absolute minimum coverage. Once you enter the pool, you remain there for about three years.
Your risk is assessed and your policy is priced according to your driving record. You will pay a penalty for each infraction, offense, accident or DUI. Being stuck in the "assigned risk pool insurance" bracket for the given time, allows drivers to reassess their own driving habits and skills, and gives them time to take some positive actions to change them for the better.
Are you Stuck There?
Not necessarily. While the company assigned to give you insurance must represent you for your period in the pool, you are still free to check other routes. When in the pool, high risk drivers can still try to find normal coverage, but they shouldn't hold their hopes too high. Get your driving record a little cleaner, and stay out of trouble before trying for mainstream insurance. The easiest way to do this is to keep your driving record clean. Avoid getting speeding or parking tickets, and follow road rules all the time. Accidents might be difficult to avoid, but a vigilant and defensive driving habit can help fix a bad driving record. Taking a defensive driving course is a good way of showing the insurance company that you are willing to change your ways, and may count a lot when the time for renewal arrives.
The simple act of installing a security system upgrade in your car can play a crucial
factor in determining if you are high risk or not, especially if you live in a bad neighborhood with a high incidence of theft. While this may not be a guarantee that your insurance will be renewed, most insurance companies take this as a good sign and may respond in your favor.
Non-Standard Auto Insurance
Non-standard auto insurance is, for the most part, a contract that a driver makes with an insurance company. It's different from assigned risk, in that government does not get involved. No one is assigned. A high risk driver selects a company and policy, just as any driver would. The difference is that a non-standard auto insurance company specializes in covering high-risk drivers.
Deciding between Assigned Risk and Non-Standard Auto Insurance
Generally, the only reason to deal with assigned risk is that you have been rejected by so many insurance companies that you feel you need government intervention to help get behind the wheel. Most drivers should seek non-standard auto insurance options first, as this represents the more direct option.
Some states may require drivers to add themselves to an assigned risk category after a DUI/DWI or other event. Check out your state's procedures for high-risk drivers, to make sure you are in compliance with what state lawmakers have asked for.
Determine what Type of Risk You Pose to an Insurance Provider
- Know your driving record. Obviously this is the first thing insurance providers look at to determine how safe a driver you are. High risk drivers are those that have had a suspended license, DUI or multiple tickets or accidents. Insurance companies believe that those who have filed a lot of claims, or been in a lot of accidents in the past, will continue to have these types of issues in the future.
- Accept issues outside of your control. Unfortunately there is nothing you can do to alleviate some issues. Your sex, marital status and age are three factors you cannot change, and all affect your rates. Younger drivers (under 25) are higher risk than older ones. Factors you do have some control over are your physical home address and your car. If you live in a high crime area, and have make or model car that is stolen a lot, you will pay a lot more for insurance than if you don't. The value of your car and its safety rating will also affect your premiums.
- Check your credit score. Insurance company is going to check your credit score, too. The lower your credit score, the less reliable you are (in their eyes), thus the higher your premiums will be. Your credit score is more of a minor factor, but something you should review prior to getting insurance, to make sure there are no false claims against you.
- Consider other factors. Other minor factors to consider are the distance you drive, your occupation and if you have ever had lapsed automobile insurance.
Add these variables up, and you can determine how risky you are to insure. Obviously, there is no magic formula, so you have to use a bit of common sense. A young male, under 25, with no credit and a history of tickets, is a much higher risk than a 55-year-old mother of four, who has worked at the same job for 15 years and hasn't ever made a late insurance payment. Luckily, you should able to discuss these factors with your insurance agent, to determine what risk you pose, and what you can do to help keep your rates down. Many factors you will not be able to change, but sometimes a simple thing, such as 6 months without an accident, or moving to a new zip code, could drastically reduce your insurance rates.