How to Get Car Insurance With a Bad Driving Record

A spotty driving record is not only likely to increase the cost of auto insurance. It may also exclude the policyholder from the standard market. Violations for speeding tickets, accidents, reckless driving, DUIs, and driving with a suspended license are all flags for increased risk to the insurer. When the flags add up to a high risk profile, the insurer will react accordingly. This is where the problem begins. Most lenders require that a person have collision and comprehensive coverage until the loan is paid off. Driving without auto insurance is not an option. The question is where to find it and how expensive it will be.

Why Insurers Treat High-Risk Drivers Differently

The pricing of auto insurance is based on the principle of expected loss. Drivers who have committed recent or repeated offenses tend to have higher claim frequency and higher claim severity. This is taken into account by insurers through the imposition of surcharges, stricter eligibility criteria, or withdrawal from the risk altogether. Guidelines from the Insurance Information Institute indicate that nonstandard drivers tend to pay 50 percent more or more than standard drivers, depending on the nature of the offense and how recent it is. This is not a punitive measure but rather a reflection of how insurers price future losses. The amount by which you will be charged extra depends on the following variables:

• The severity of the violation
• Whether injuries or property damage were involved
• How recently the incident occurred
• Your age, location, vehicle type, and coverage limits
• In most states, your credit-based insurance score

What Happens When Standard Insurers Say No

If an individual is no longer eligible for standard coverage, that does not mean that there is no longer a marketplace. It just means that there is a different marketplace. All states have some type of residual or assigned risk program. This type of program is intended to ensure that even high-risk drivers can purchase the legal minimum amount of insurance. These types of insurance programs are not intended to be inexpensive. Their purpose is to ensure that drivers can purchase insurance and that they remain legal on the road. Data from the Consumer Federation of America indicates that 7 percent of U.S. drivers purchase their insurance through non-standard or residual market programs. All insurers that conduct business in that state must accept their proportionate share of these high-risk insurance policies. In many states, these programs are sponsored by organizations that are associated with the insurance industry, including AIPSO.

When an SR-22 or FR-44 Is Required

Some infractions require additional compliance. Drivers who have a DUI, reckless driving, driving without insurance, or have committed multiple serious infractions may be required to provide proof of financial responsibility. An SR-22 is not insurance. It is a certification that your insurance meets the state’s minimum liability requirements. Some states require this for three to five years. Florida and Virginia require the equivalent of an FR-44. This requires higher liability limits. These filings limit the choice of insurers and increase the cost of insurance but do not prevent the driver from obtaining insurance.

Why Shopping Still Matters for High-Risk Drivers

High-risk drivers tend to believe that all insurance companies will charge similar prices. This is not true. Insurance companies evaluate risks differently. Some are more lenient towards older driving infractions. Others place more emphasis on credit scores than driving records. Some write non-standard policies while still being within the mainstream brand. Even if a driver is declined by one company, he or she might be accepted by another. Shopping is not a choice; it is the primary way to control costs.

How to Work Back Toward Standard Rates

High-risk status is usually temporary. Insurers reassess risk continuously, but time matters. Most carriers look back three to five years when evaluating prior violations. As incidents age and no new violations appear, their impact fades. The process is gradual, but measurable. Several behaviors accelerate improvement:

• Avoiding any new moving violations
• Staying continuously insured without lapses
• Reducing mileage where possible
• Completing approved defensive driving courses
• Improving credit health in states where credit is allowed

According to data from the National Highway Traffic Safety Administration, speeding and distracted driving continue to be two of the most potent predictors of serious accidents, and this is taken into account by insurers. Telematics programs can also be a factor. Some insurers provide usage-based monitoring programs, rewarding good mileage, braking habits, and phone use. However, it is important to note that not all telematics programs work this way. Some programs can actually increase the premium if certain behaviors are exhibited.

Credit Still Matters in Most States

Only a handful of states bar insurance companies from using credit-based insurance scores. In other states, credit history continues to be a significant factor in insurance pricing. Research compiled by the National Transportation Safety Board, as well as consumer groups, indicates that insurance companies link poor credit with a higher probability of filing a claim, not necessarily with poor driving habits. The reasoning behind this may not be clear, but improving credit history has a significant impact on insurance premiums.

The Long View

Poor driving records shut doors, but they never lock them. The insurance process is set up to rate risk, not penalize drivers. The price of insurance will be steeper in the short term. Choices will be limited. However, with time, good driving, and maintaining insurance, most motorists will move into more standard pricing categories. The biggest mistake is thinking that today’s rate is tomorrow’s rate. Behavior compounds in auto insurance. So does good behavior.