Drivers are usually grouped into one of three categories when it comes to auto insurance: standard (average and preferred drivers), nonstandard (high risk) and the residual market.
Drivers grouped into the nonstandard auto insurance category have a higher chance of making claims than those who can get standard auto insurance, in the eyes of insurance companies. To compensate for that risk, they’re charged higher insurance rates.
Some insurers might not even cover high-risk drivers.
It’s no surprise that causing lots of accidents will surely push you into the nonstandard category. But you might be surprised at what else can land you in that classification.
What Factors Can Put You in the Nonstandard Category?
Several risk factors can send you down the nonstandard road, although there’s no precise definition of nonstandard auto insurance. Among the risk factors are:
- Driving a high-performance or custom-built car
- Driving a “salvage title” car, meaning it’s been severely damaged or declared a total loss
- Living in a neighborhood with high rates of theft or vandalism
- Being an inexperienced driver (often someone under age 25)
- Being an elderly driver
- Holding a foreign driver’s license
- Having a gap in your auto insurance history
- Buying only the minimum liability insurance required in your state
- Getting involved in a lot of accidents
- Filing numerous claims within a short period
- Racking up speeding tickets and other moving violations
- Being convicted of drunk driving
- Having a poor credit history
- Getting your auto policy canceled or non-renewed
Although it typically comes at a high price, nonstandard auto insurance might lack coverage that standard policies do. For instance, nonstandard coverage may not extend to a person who sometimes borrows your car.
Having a Nonstandard Insurance Past Can Haunt You
Research from data and analytics company Verisk shows nonstandard coverage makes up 20% of premiums for personal auto insurance. Others estimate it to be around 30% to 40% of the auto insurance market.
Three hypothetical 30-year-old female drivers in the study were the same, with perfect driving records, except that one of the drivers was switching from State Farm and the two others were moving from a nonstandard insurer.
The 20-city study compared quotes from seven major insurers. Among the companies that didn’t hike rates based on a driver’s previous insurer were Liberty Mutual, Progressive and State Farm.
How To Move From Nonstandard To Standard Auto Insurance
Some factors that put a person into the nonstandard category can’t be helped—such as being an inexperienced driver, being elderly or living in an area judged to be high risk for theft.
But no one needs to be stuck forever in the nonstandard category because of their driving record or credit. If you know what landed you in the nonstandard category—whether it’s your driving record or your credit—you’ll know what needs to be repaired in order to get standard rates again.
Who Sells Nonstandard Auto Insurance?
The best car insurance companies for high-risk drivers offer decent rates compared to competitors and SR-22 insurance.
Insurers selling non-standard car insurance include:
- Acceptance Insurance
- Alfa Insurance
- Bristol West (part of Farmers)
- Dairyland
- Direct Auto Insurance
- Gainsco (recently acquired by State Farm)
- Geico
- The General
- Kemper
- Mercury
- National General (recently acquired by Allstate)
- Progressive
- Safe Auto
The Last Resort: The Residual Market
There is a category below the nonstandard market: The residual market, also called the “assigned-risk pool.” This is for drivers who are unable to buy insurance because they’re declined for coverage by standard and nonstandard auto insurers. Generally any auto insurance agent can help you make an application to your state’s residual market.
The vehicles insured in a state’s assigned-risk pool typically make up less than 2% of a state’s total because drivers are able to get coverage elsewhere. But there’s one notable exception: North Carolina, where about 30% of vehicles are insured through the assigned-risk pool.
All auto insurers in a state are usually required to take a percentage of residual market drivers, based on the company’s size in the state.
The residual market is in place to make sure that all drivers have access to some form of auto insurance. Premiums here will be higher than both standard and nonstandard insurance options.
