You might hear the term “non-standard auto insurance” when planning car insurance. This term might be hard to understand if you are new to buying car insurance or don’t know much about it. Here’s what you need to know about non-standard auto insurance, including what it is, how it works, and whether or not you need it.
What does “non-standard” car insurance mean?
Drivers who are thought to be most likely to get into a car accident can get insurance that isn’t standard. To cover the costs of an automobile accident, a driver purchases auto insurance from an insurance provider.
Auto insurance isn’t standard for people who have been in many accidents or have a bad driving record. Most of the time, non-standard auto insurance costs more than a typical policy because the insurance company is more likely to pay out money because of an accident.
Reasons for Non-Standard Auto Insurance
Drivers can get non-standard insurance for several different reasons, such as:
• People whose licenses have been suspended or taken away
• Too many traffic tickets or tickets for speeding
• Driving while drunk is a crime (DUI)
• New drivers, like teenagers, and older drivers, like seniors, are on the road for the first time.
Non-standard drivers may have been in multiple accidents or gotten tickets for speeding in the past. They may have adequate driving experience. If an insurance company offers non-standard auto insurance, they might not check the driver’s credit history. This means that the driver could have bad credit or none at all. Drivers who are too young or too old might not be able to get a policy because they’re just too dangerous.
How does non-standard insurance work?
Not all insurance companies will cover high-risk drivers, so you need to find one specializing in non-standard or high-risk auto insurance. Because many people do not qualify for standard or preferred risk underwriting, they will most likely choose a non-standard insurance firm for their auto insurance needs.
When shopping for non-standard car insurance, prices can vary much, just like most other types of insurance. It’s fine as long as your driving history is clean and you never submit a claim; you should continue in the standard (voluntary) auto insurance market.
Once you find the cheap auto insurance company you want, the buying process is similar to what you may be used to with standard companies. If you need to file an SR-22, make sure you know how to do it by asking your insurance company.
How the price of premium is set
Insurance companies must determine how likely someone will make a claim when writing a new policy. This is because the premiums they collect must be more than the benefits they pay to make money. An insurance company has a claim risk if an insured person or their vehicle is involved in an accident.
Most of the time, insurance companies have to find the right balance between low-claim drivers, who pay lower premiums, and moderate-to-high-claim drivers, who pay higher premiums. If the insurance company doesn’t handle claims risk well, it could take on too much risk and pay out more benefits than it gets in premiums.
When figuring out a premium, an insurance company usually looks at the following:
• Driver’s age
• A record of driving
• Car usage
• A record of credit
• Geography, such as a high risk of car theft in a particular area
Even though this isn’t a complete list of all the things insurers look at, the information above helps them figure out how likely a driver will get into an accident. From there, you can figure out how much to charge each month for the coverage.
Standard and non-standard car insurance
Standard car insurance is an essential policy for drivers who are about as risky as the average driver. Standard auto insurance policies do not burn the pockets, unlike other types of auto insurance, because drivers typically have a clean driving record and little to no accidents. This indicates that the premiums are usually lower.
Non-standard auto insurance, on the other hand, is for people with bad driving records and has higher monthly premiums than standard policies. But there is also a third group, called “preferred drivers,” thought to be the safest based on their history of driving and vehicle use. Often, preferred drivers get even cheaper rates than standard and non-standard policyholders.
Lastly, if you can’t get cheap car insurance from insurance companies that cover high-risk drivers, consider your state’s pool of high-risk drivers. This pool helps high-risk drivers who can’t get insurance anywhere else get coverage. As a last resort, this should only be used because most states’ assigned-risk programs are more expensive than coverage from non-standard insurance companies.