Everyone is legally required to have an insurance policy if they own a vehicle, but what if none of the insurance providers will agree to insure you? This is a relatively common occurrence for people who have driving histories that, for one reason or another, leading insurance companies to consider them too high-risk to insure. In this case, they need an assigned risk insurance plan.
So, does that mean these drivers are out of luck and simply can’t own a vehicle because they can’t legally drive it without insurance? Not exactly.
Thanks to an insurance term known as the assigned-risk insurance pool, even drivers who can’t obtain insurance on the private market can still get insured for a vehicle they own and/or operate.
Here’s everything you need to know about assigned-risk insurance plans, the assigned risk pool, how you end up in it, and how you can get out of it.
Assigned Risk Insurance Plan Definition
An assigned risk insurance plan is one that you obtain by being added to the assigned-risk insurance pool, a state-directed program designed to help people that might not otherwise be able to get car insurance get insured. It was created for high-risk drivers who have a history of driving infractions, auto-related crimes, or other issues that mean no insurance company is willing to offer them a policy on the private market. Basically, it’s the last resort for people who need to get their vehicle insured by law but can’t convince any specific insurance company to extend them a policy.
What is an Assigned Risk Pool?
The assigned risk car insurance pool was designed to solve a bit of a problem that arises when it comes to a risk-based business such as car insurance. Basically, insurance companies assess the overall risk of insuring each person they extend a policy to each day. They’re trying to determine how much they should charge each driver in insurance premiums to make up for the potential risk that they’ll need to submit a claim which the insurance company will then have to payout. Basically, the higher the likelihood that someone will submit a covered claim, the higher their insurance premiums will be.
But some drivers are considered so risky that they can’t buy car insurance anywhere on the private insurance market. This could be due to past driving behaviors, multiple DUIs, or other driving-related factors.
But if these people own vehicles, they’re required by law to have car insurance. So where do they get it?
That’s where the assigned risk car insurance pool comes in. This is a program in which states assign these high-risk drivers to insurance companies in that state, rather than drivers finding policies on the private market.
But who ends up in the assigned-risk pool, and how do they get there?
What Causes You to Be in the Assigned Risk Pool?
The factors that can lead you to be considered a risky bet and ending up in the assigned risk pool can vary, but they all come down to risk. If an insurance company determines that you’re so likely to result in a covered payout that you’re not worth insuring on the private marketplace, you’ll end up in the assigned-risk pool. Here are some of the most common reasons why people must opt for assigned-risk insurance plans.
Lapses in Insurance or Lack of Insurance Record
Surprisingly, many drivers can miss out on coverage simply by missing out on coverage in the past. Insurers like to see a consistent record of insurance coverage, including on-time payments over the course of your driving history. If you have been uninsured for long stretches, have missed payments, or don’t have any record of insurance at all, you’ll be considered high-risk and may be denied insurance coverage on the insurance marketplace.
Poor Driving Record
Even worse than a poor insurance record is a poor driving record. If you have a long history of traffic violations, DUI or DWI convictions, and accidents in which you were found to be legally at-fault, you may find yourself in the assigned-risk pool after being denied coverage from multiple insurance companies. After all, past behavior is one of the most effective predictors of future behavior. Whether it’s fair or not, if you have a history of unsafe driving, insurance companies will expect that you’ll be an unsafe driver in the future, too. That’s not the kind of driver they’re looking to insure, even with a higher premium.
Lack of Driving History
Can you really be denied insurance coverage simply because you’re a new driver? After all, everyone has to drive for the first time at some point. Teenagers and new drivers, for example, are considered relatively high-risk to insure, but can frequently still acquire traditional coverage (though they should expect to pay higher rates than more experienced drivers with good driving records).
A lack of driving history will almost always lead to higher insurance rates, but usually won’t be cause for being denied coverage unless there are other factors also contributing to you being considered high-risk. It can be a contributing factor, but usually isn’t the deciding factor in entering the assigned-risk pool in most cases.
Bad Credit
While they may not seem directly connected, drivers with poor credit are considered higher risk by insurance companies and may be denied coverage if their credit history is poor enough. This may seem unfair, but research does show a correlation between people with poor credit and more risky driving behaviors & higher instances of submitting car insurance claims. If you don’t want to end up paying high assigned-risk insurance rates, get your credit score up as much as possible.
High-Risk Location
Believe it or not, where you live can actually have an impact on whether you’re able to get insurance. If you live in an area with high historical rates of theft, vandalism, or other vehicle-related crimes, you may find it harder to get affordable car insurance. It’s not your fault for living in a specific area, but it is a factor that your insurance company takes into account when determining risk. The more likely your vehicle is to be stolen or vandalized, the more likely that your insurer will have to pay out a claim to have it replaced or repaired.
What to Expect from Assigned Risk Insurance Rates
While the good news about assigned-risk insurance pools is that they allow everyone who needs insurance to get it, there is a major catch— assigned-risk insurance policies are significantly more expensive than those acquired by low-risk drivers on the private market.
Meanwhile, you won’t have lots of options when it comes to the kind of coverage you can receive. In some state assigned-risk pools, that means not having the option to purchase collision or comprehensive insurance. You may also be limited in the coverage maximums you’re entitled to in an assigned-risk insurance plan.
Often assigned-risk insurance plans fail to provide adequate coverage for drivers with significant assets, such as a home or substantial savings in the bank. In the event of a lawsuit, your insurance wouldn’t cover the full value of your assets, which could leave you in a tough financial and legal spot.
Getting Out of the Assigned-Risk Pool
So how do you get out of the assigned-risk pool once you’ve gotten into it? It may not be easy, but it is simple— be a safe driver for a solid period of time. The longer your record of safe driving while properly insured, the less risky you’ll be considered by insurers. Eventually, you can apply for normal insurance on the open market and see whether you’ve earned your way back out of the pool.
Conclusion
Have more questions about auto insurance? Check out our website for dozens of articles on the full range of car insurance-related topics, or you can start your free online quote today!
