What Causes High-Risk Auto Insurance Premiums

Vehicle insurance providers meticulously examine an applicant’s history for indicators of risk before extending favorable rates. In this context, several factors considered during car insurance premium assessments can result in your classification as a high-risk driver or applicant. This categorization implies an increased likelihood of causing accidents or filing claims due to elements evident in your driving record, such as a DUI, recent at-fault accidents, multiple traffic violations, a subpar credit score, or being perceived as a higher risk due to age or limited driving experience.

Depending on the gravity of these risk factors, you might encounter difficulties in securing automobile insurance within the standard market. Consequently, you may need to explore non-standard car insurance providers. However, be prepared for the prospect of substantially higher premiums. Let’s explore the specific factors that can lead to your classification as a high-risk driver or vehicle insurance applicant.

1.   At-fault Accidents: Motorists may be involved in many accidents but the ones that lead to large auto insurance premium increases are the ones they are deemed at fault. When you are the one causing the accident, not only it reflects badly on you as a driver but also your insurer may have to compensate all involved parties including third party injuries and damages up to policy limits. That is why at fault accidents can easily place you in a high-risk driver category. If you have one at-fault accident and no other negative factors you may see substantial increase in your car insurance. However, if you also have other negative marks going against you, your current insurer may drop you at the next renewal and you may find it harder to find alternative coverage.

2.   Driving Under the Influence (DUI): Being convicted of driving while intoxicated can alone place a driver in the high-risk category, regardless of age or past history. Not only does your car insurance premium double or more depending on the state or company but also many insurers may not even offer a quote. DUI stays on your driving record longer than most other traffic violations, potentially making you pay much higher auto insurance premiums over a longer period.

3.   Traffic Violations: Although a speeding ticket may increase your premiums regardless of your age and driving history, more serious offences like a reckless driving conviction can push a driver straight into the high-risk category. Repeat offenders are also often dealt harshly by authorities in terms of penalties and license points and this is noted by insurers.   

4.   Poor Credit History: Having a bad credit score can be costlier than having a DUI conviction on record in some states. According to Consumer Federations of America, motorists with bad credit scores can pay up to twice higher vehicle insurance premiums. The hardest part of it all is that you can have a great driving history with no accidents and traffic violations for a long time but still end up being categorized as high-risk due to your bad credit score. Unfortunately, vehicle insurers perceive people with poor credit history to be more likely to make a claim.

5.   Younger Drivers: At times vehicle insurance premiums may be mainly based on perceptions and statistical data. You may be a highly responsible young driver who knows and minds all the driving rules and has been trained well. Still, you are likely to face twice to three times higher car insurance rates than a similar driver over the age of 25 depending on age because teenage drivers are statistically higher risk. Not only do they cause more accidents but their accidents tend to be severe with injuries and deaths. However, as young drivers gain experience and maintain clean records, their insurance rates may gradually come down.

6.   Novice Policyholders: Obtaining your initial auto insurance policy can be challenging because you lack a track record of insurance history, a crucial factor for insurance companies in assessing your claims and loss history. Additionally, if you happen to be a younger driver without prior experience, you may face higher car insurance premiums compared to older individuals who are also new to driving.

7.   Older Drivers: Unfortunately, vehicle insurance premiums start going up again typically after the age of 70. Insurers consider senior drivers as high-risk due to age related driving issues such as declining reflexes and potential health issues. The older the applicants the higher their rates may go up.

8.   Lapse in Coverage: Many people may not realize but dropping coverage while you still own an automobile is highly frowned-upon in the insurance industry. Companies have no way of knowing if you were still driving your car while you were uninsured and this possibility of highly irresponsible behavior makes them place drivers with lapse in auto insurance coverage into a high-risk category, especially if the lapse is more than 30 days.

9.   High-risk car: The vehicle insured is one of the key factors in premium calculations. Having a high-performance or highly modified automobile can potentially increase your insurance premiums substantially, especially if you are still a young driver or don’t have a clean driving record. There is a possibility that you may need to get coverage from a high-risk insurer because standard insurers decline to insure your car or you with a specific car.

10.  Cumulative Effects: Often one small claim or a speeding ticket on an otherwise clean driving history may not make a driver high-risk. However, cumulatively they can place you in the high-risk category. This may result in increased car insurance rates as well as resulting in non-renewals and coverage refusals if there are too many infractions or they happened in a short space of time.

Implications of Being Placed in High-Risk Category

Today vehicle insurers can quickly verify your driving history, check your credit score and claims record and place you in various risk tiers that result in varying rates. Essentially it makes sense that people who are more likely to cause the depletion of premium pools are made to contribute more into the pool. This approach not only penalizes risk takers but also incentivizes good driving habits.

1.   Higher Premiums: The primary and immediate outcome of being classified as a high-risk driver is the anticipation of elevated car insurance premiums. Within the insurance sector, the prevailing belief is that premiums should align with risk levels, and individuals who are deemed to have higher risks should contribute more to the insurance pool, considering they are likely to benefit from it more or are expected to do so due to their perceived higher risk levels.

2.   Limited Coverage Options: As mentioned earlier, not only many insurers aren’t keen on high-risk segments of the market but some of them may not even participate. As a result, high-risk applicants may be pushed into the non-standard auto insurance market. This reduced competition potentially increases the premiums further.

3.   Requirement for SR-22 Certification: For cases involving DUI/DWI convictions or other serious offenses such as driving without insurance, especially causing accidents while uninsured may require drivers to obtain an SR-22 certificate to prove their financial responsibility and maintain driving privileges. Although it may not increase car insurance premiums substantially this requirement may result in additional costs.

4.   Long-Term Impact: The high-risk driver classification can have long-lasting consequences. Insurance companies typically look at a driver’s risk profile going back several years. If you maintain a clean driving record during this time, you may gradually transition back to standard insurance rates. However, for serious offenses like DUIs, it can take many years of responsible driving to restore your insurance rates to pre-conviction levels.

In summary, preferred risk drivers with long clean driving record, insurance history and good credit score get the best auto insurance rates. Standard risk applicants still get good rates even though their records aren’t perfect. And drivers in the high-risk category for vehicle insurance are expected to pay higher premiums and work harder to find affordable coverage.

Proactive solutions like taking a defensive driving course can help motorists in improving their profile. Also, usage-based programs can be a good solution in some cases and can help you reduce premiums if you demonstrate good driving patterns through telematic devices installed in your vehicle. Also, these and pay-per-mile policies can be a good solution for people with poor credit score. Telematics based policies calculate the premiums differently and this may reduce the impact of the poor credit score. They typically have a base rate that may take credit score into account but a large part of the premium is based on real data collected through telematics such as driving patterns or mileage driven.