Everyone knows that there are certain factors that can make your insurance rates rise, but what exactly does it mean when you’re considered a high-risk driver as it pertains to your insurance?
We’re breaking through the myths to provide this clear guide for what it means to be high-risk and how long you’ll be considered a high-risk driver after a period of safe, responsible driving.
What is High-Risk Insurance?
The business of insurance is all about assessing risk. In order to turn a profit, insurance companies must collect more in insurance premiums than they pay out in insurance claims. To make sure they strike that balance, they must cover their losses by charging higher-risk drivers more for coverage.
While there is no explicit insurance ‘type’ for high-risk drivers, any driver who is considered high-risk will often have a very different experience when seeking coverage than someone who is considered ‘low-risk.’
What raises insurance rates is an increase in ‘perceived risk,’ or how likely your insurer thinks you are to submit a claim. While they can’t sit in the vehicle with you and see how good of a driver you are, they can use other factors and facts about you to make their best guess about how much of a risk you are when it comes to filing a claim that must be paid out.
How Long Are You Considered High-Risk?
Unfortunately, there’s no clear-cut period of safe driving after which you’ll be stamped as a ‘safe’ driver and can lower your car insurance costs. That said, insurers generally tend to look at your last five years of driving history— in some cases, just three years.
Does that mean that if you have a single negative driving incident four years and six months ago you won’t be able to get insured? Not necessarily. Events are weighted based on how recent they are and how representative they are of your driving overall. If you had one negative driving event years ago and have been a sellar driver ever since you likely won’t have to put up with massively inflated rates. However, if you have a very recent or severe incident or multiple incidents in your recent history, you’ll probably be classified as high-risk by most insurers, resulting in higher rates and potentially difficulty getting coverage on the private marketplace.
Why You’re a Considered High-Risk Driver
Wondering what can cause someone to be considered a high-risk driver? Some factors come down to your driving behavior and are within your control, while others are as simple as your age, location, and total time on the road. Here are some of the most significant factors impacting your risk assessment from insurance companies.
History of Accidents
One of the most common reasons for being designated as high-risk is an accident where you’re at fault. If someone files a claim to your insurance about an accident you caused, you can expect a boost in your monthly premiums.
That said, there are some exceptions. Some insurers will allow for small claims of $500 or less without raising your rates, while others offer what’s known as ‘accident forgiveness,’ where they won’t increase your rates after just one at-fault claim on your policy. Ask your insurer what their policies are when it comes to at-fault accidents and what raises car insurance rates for you.
Traffic Violations
Traffic violations cover any incidents where you are found guilty of failing to obey traffic-related laws. These can range from minor infractions, such as slight speeding or failure to obey a traffic sign, to major violations, such as DUIs or driving under a suspended license.
Generally, the more serious the violation, the more dramatic the increase in your insurance costs. Some extremely minor violations may not result in a rise in your premiums at all.
Location
One of the main reasons for high-risk changes is simply that some cities and areas have higher rates of traffic accidents, auto thefts, or weather-related damage. If you move from a relatively safe area to one where vehicle incidents are more common, you can expect to notice a bump in your insurance costs.
Credit Score
Believe it or not, your credit score can have an impact on your insurance premiums and whether you’re considered high-risk in some states. Some insurance companies have conducted research that suggests a link between lower credit scores and lower driving risk, the idea being that if you’re likely to make more responsible financial decisions, you’re likely to be more responsible behind the wheel, too. While you may or may not agree with this logic, the fact is that a decrease in your credit score can sometimes lead to an increase in your car insurance costs.
Age
Age plays a big role in whether you’re considered high-risk or low-risk, but generally only if you’re very young or very old. Teenagers are famously much more expensive to insure than adults, and senior citizens can also experience higher premiums as they’re a statistically likely group to be involved in traffic accidents. If you’re a teenager that’s reaching college age, the good news is that you might soon experience a drop in insurance premiums. But if you’re aging into your golden years, your premium may rise slightly as you get older.
Driving Experience
The longer you’ve been driving, the more experience you have on the roads, and the less risky you’re considered by insurance companies. If you’ve been driving for a long time with a minimal amount of traffic incidents or claims, your insurance costs should start to inch down the more time passes.
Vehicle
One of the ways that insurers assess their own financial risk is by looking at the type of vehicle they drive. Certain vehicles are more costly to repair, such as large or expensive vehicles that feature top-of-the-line or proprietary technology. Others are considered more likely to be involved in an accident, such as sports cars which tend to be owned by people who like to drive fast (and may occasionally forget about the speed limit).
If you’re looking into purchasing a new vehicle, you should consider whether it will significantly raise your insurance premiums. You’ll want to factor this increased monthly cost into your budget when determining how many vehicles you can afford to buy.
Mileage
Vehicles that drive more are more likely to be involved in accidents— that’s a simple statistical fact. So if you report more miles on your next request for an insurance quote than your last one, don’t be surprised if it results in an increase in your premium. Ask your insurer what their mileage thresholds are for premium increases or decreases. The amount of change may not be significant, but you may be able to save in some cases by driving less or taking public transit occasionally to reduce your costs.
Lapses in Coverage
If you go a period without insurance, it’s known as a lapse in coverage. Lapses in coverage can usually lead to being considered high-risk.
That said, there are some exceptions. Many companies will let you reinstate your insurance within a week without penalties, and some offer as much as a month-long grace period without major consequences. That said, this usually only applies if you are reinstating an existing policy, not setting up a new one.
Getting Coverage as a High-Risk Driver
Getting insurance as a high-risk driver doesn’t have to be a huge challenge. At Freedom National, we specialize in providing relatively cheap car insurance for drivers of all types, including those who are classified as high-risk or who may require an SR-22 due to driving-related convictions in the past.
Ready to get a quote? The application takes just minutes.
