What High Risk Drivers Need to Know About Car Insurance

By Jessica Bosari
After 13 years in personal and commercial insurance, Jessica Bosari now writes about personal finance, car insurance, risk management and related topics. Since 2008, she has been simplifying complex ideas through engaging articles for her readers.

What High Risk Drivers Need to Know About Car Insurance

Some drivers are more likely to become involved in accidents. These drivers are labeled “high risk” by insurance companies and pay higher premiums to compensate companies for the higher number of claims they initiate. Drivers in this group include teen drivers and those with previous accidents, driving violations, or bad credit histories. High risk drivers must be patient and work at improving their risk profiles over time. However, most drivers can improve their ratings and enjoy lower premiums if they spend a solid year focusing on better driving and financially responsible behaviors.

What Happens if You Need High Risk Car Insurance?

So, what are your options after learning you fall into a high risk category for car insurance? It’s likely you learned about the problem after getting one or more car insurance quotes. It’s a good idea to call the companies and find out which risk factors contributed to the premium they quoted so you can work on remedying the problems.

Common Factors Creating High Risk

Car insurance premiums are based on many factors that drivers have little or no control over. Although it is illegal to set rates based on race or income level, the following factors come into play:

  • Type of car
  • Miles driven
  • Location of residence
  • Occupation
  • Education level
  • Credit history
  • Age
  • Sex
  • Driving history

High risk drivers tend to be young and male. They often have one or more previous accidents or driving violations. These problems get worse with a poor credit history, dangerous job, poor education, densely populated residential area, long commute, or ownership of a vehicle with high theft risk.

Getting Insurance When You’re High Risk

Many states run “assigned risk” programs to help high risk drivers get the car insurance often required by law. Drivers turned down by several insurance companies can join the assigned risk pool of drivers to get car insurance. The state assigns drivers to insurance companies based on the number of drivers they insure in the state. Companies that have more market participation must take on more assigned risk drivers. Companies usually charge much higher premiums to these drivers rather than force good drivers to subsidize the cost.

Many companies charge excessive premiums, but this effectively defeats the purpose of assigned risk by making it impossible for the driver to afford coverage. For this reason, states tend to restrict insurance companies’ freedom in setting rates. Some states allow insurance companies to price policies any way they like, but most require companies to file their rates with the state and secure approval before they can use the new rates.

If you join the assigned risk pool and receive a quote for insurance that is excessive, it’s important to call your state’s agency in charge of regulating insurance. They may be able to help you find a way to get affordable car insurance.

Take Control of Your Car Insurance

Whether you can find affordable insurance right now or not, you can take steps to make it more affordable in the future. Spend the next year focusing on factors you can control, like driving more safely and improving your credit history:

  • Take extra care to obey all traffic laws. Studies show that having three years without a ticket should lower your premium.
  • Take a defensive driving course. Passing a class like this can result in discounts as high as 15 percent. The discount usually lasts for three years. Use what you learn to drive defensively and avoid accidents.
  • Get a low-risk car. Trade in your car for a model with better safety features or lower theft rates.
  • Move to a better neighborhood. If you can afford the rent, try moving to a less-congested neighborhood where premiums will be lower. If you can do this while moving closer to work, you can save even more by driving fewer miles.
  • Fix your credit. Pay your bills on time and only borrow money if you have to. Pay down your credit debt as much as possible. You’ll see your credit score begin to rise and your insurance rates drop.

You can’t undo the past, but you do have control over your future. Making the decision to change your driving and financial habits will improve both your car insurance costs and your quality of life. For one type of high risk driver, however, it’s not about overcoming the past; it’s about having no driving history to prove you’re a good driver.

Insurance Options for Teenage Drivers

Teenagers fall into a special category because they have little or no driving history. According to the Insurance Institute for Highway Safety, mile for mile, teen drivers are three times more likely to cause an accident than drivers over the age of 20. Immaturity tends to encourage irresponsible behaviors and risky habits such as speeding. The inexperience of teen drivers means they also often fail to recognize or respond appropriately to hazards.

Graduated licensing can help to reduce a teen’s driving risk, giving them more time to practice driving with supervision before applying for a license. Graduated licensing usually restricts a teen’s driving for a number of years after getting a license, preventing risky situations like late-night driving or driving with other teens who may cause distractions. Although these measures help teens become better drivers, they don’t control costs.

Car Insurance Discounts for Teens

Teens have to prove themselves for a number of years. And, fair or not, they will pay higher insurance rates until they turn 25. The best way to save money is to take advantage of special discounts. The most common discount available to teens is the Good Student Discount, a car insurance discount for teens with a grade-point average of “B” (3.0) or better. Like other high risk drivers, teens can take defensive driving courses to earn discounts, too.

Teens can stop rates from climbing by driving defensively and avoiding traffic tickets to build a strong foundation for low rates once they turn 25. They can also control costs by driving a cheaper, older car. If there is no car loan, teens don’t have to carry costly physical damage coverage.

For High Risk Drivers, It’s All About the Future

If you’re a high risk driver, you have options. Take your time, be patient, and focus on safer driving. After a year, you’ll begin to see rates going down. After three years, you’ll see a big drop in cost. If you’re a teen, focus on building a strong driving history that will help you once you turn 25.