Nonstandard Auto Insurance – Coverage for High Risk Drivers
There are drivers who, for various reasons, find it challenging to obtain insurance in the standard auto insurance market. For these, nonstandard auto insurance has become their refuge.
TL;DR
- Nonstandard auto insurance provides coverage for motorists that standard insurance providers consider high risk.
- It plays a crucial role in agencies as they aim to protect all types of drivers and reduce underinsured statistics.
- Common misunderstanding: nonstandard auto insurance isn’t for “bad” drivers, it accommodates a range of unique circumstances.
- Quick win: insurance agencies can improve customer satisfaction by informing clients about nonstandard auto insurance options.
What Is Nonstandard Auto Insurance in Insurance?
Nonstandard auto insurance is the policy that insurers offer to drivers who typically don’t qualify for coverage under a standard auto insurance policy. This could be due to reasons such as their driving history, type of vehicle they drive, or personal circumstances affecting their risk profile.
In insurance lingo, nonstandard auto insurance policies are those designed for drivers with higher than average risk factors. Commonly seen in various insurance policy forms, these offer liability, comprehensive coverage, and more, albeit at higher premiums.
Key Related Terms to Know
- High-Risk Auto Insurance: A type of insurance coverage offered to drivers with a tarnished driving record or other high-risk factors.
- Comprehensive Coverage: Insurance that covers damage to your vehicle not caused by a collision.
- Liability Coverage: This covers legal costs and payouts the insured has caused to other people and properties.
- SR-22 Form: Document required by the state to certify that an individual is continuously maintaining auto insurance liability coverage.
- Underinsured Motorist: Part of an auto policy that covers you if you’re involved in an accident with someone who does not have enough insurance.
- Uninsured Motorist: Auto insurance coverage that protects you if you’re involved in an accident with someone who has no auto insurance.
- Salvage Title: A form of vehicle title branding, which notes that the vehicle has been damaged and/or deemed a total loss by an insurance company.
Common Questions About Nonstandard Auto Insurance
Why would someone need nonstandard auto insurance?
A driver could need nonstandard auto insurance if they pose a higher risk to insurers. This could be due to a range of factors such as a history of multiple accidents, traffic violations, or being a first-time driver with no driving record. The person could also be an older driver with declining skills, or a driver with a foreign license. Even a person with a criminal background may require nonstandard insurance.
Are the rates for nonstandard auto insurance always higher than standard?
Yes, nonstandard auto insurance typically has higher premiums than standard car insurance. This is because it caters to high-risk drivers who have a higher potential for claims. For example, a driver with a history of speeding tickets and accident claims usually attracts higher rates due to an increased likelihood of insurance claims.
Can you switch from nonstandard to standard auto insurance?
Yes, switching from nonstandard auto insurance to standard auto insurance is possible. The shift depends primarily on improvements in the criteria considered to rate your risk, such as a cleaner driving record over time or better credit rating.
Is nonstandard auto insurance necessary for everyone with a driving record?
Not everyone with a driving record needs nonstandard auto insurance. Many people with minor infractions or a single accident may still qualify for standard auto insurance.
Nonstandard Auto Insurance vs. Standard Auto Insurance
Key differences between nonstandard auto insurance and standard auto insurance lie in the risk factors insurers identify and pricing.
Comparison Area | Nonstandard Auto Insurance | Standard Auto Insurance
|
Primary use case | High risk drivers | Average risk drivers |
Coverage / concept type | Comprehensive, liability, and more | Comprehensive, liability, and more |
Typical exclusions | Fewer exclusions, more flexible | Certain driving offenses |
Common mistakes | Assuming it’s only for bad drivers | Thinking one minor infraction moves you out |
Real Claim Examples Involving Nonstandard Auto Insurance
Scenario 1: Jake, a teenage driver with little driving experience, had a nonstandard auto insurance due to his higher risk profile. One day, he regrettably caused an accident. Thankfully, his nonstandard auto insurance covered the property damage, which would have otherwise been a substantial financial burden for Jake and his family.
Scenario 2: Andrea, holder of a foreign license, obtained nonstandard auto insurance upon moving to the States. She had a minor at-fault accident but her insurance took care of the person’s medical and repair bills, underscoring its importance.
Scenario 3: Paul had his license revoked for a DUI offence. He filed for an SR-22 form and obtained nonstandard auto insurance. A year into the policy, he had an accident involving bodily injury. Fortunately, his policy covered the substantial medical fees.
Limitations and Common Mistakes
- A misconception that nonstandard auto insurance is only for “bad drivers.” It can also apply to families with young drivers, individuals with criminal backgrounds, and more.
- Nonstandard insurance doesn’t mean you have a clean slate. Prior driving offenses and risk factors still influence pricing.
- Forgetting to inform the insurer when improvements have been made that would allow a switch to a standard policy, such as maintaining a clean driving record.
How to Explain Nonstandard Auto Insurance to Clients
For Personal Lines client: Nonstandard auto insurance is a type of policy given when there are factors that make you a higher risk to insure. If you have a lot of tickets, accidents, or a DUI on your record, you may benefit from this type of policy while working to improve your record.
For Small Business owner: If you’re employing drivers who have a checkered driving history or employees driving high-risk vehicles, you could consider nonstandard auto insurance to ensure adequate protection for both your company and employees.
For CFO or Risk Manager: With nonstandard auto insurance, you can manage higher-risk drivers in your company fleet without risking lapses in coverage. It might mean higher premiums, but it ensures consistent coverage and reduces risks of financial liabilities from potential accident claims.