How to Get Cheap Assigned Risk Auto Insurance
Last Updated on May 9, 2021
Certain high-risk drivers are required to get assigned risk auto insurance. Just because you’re required to get assigned risk auto insurance, however, doesn’t mean that you need to spend a fortune.
Today, we’re explaining the best ways to get cheap prices on assigned risk auto insurance.
What is Assigned Risk Auto Insurance?
Assigned risk auto insurance is a type of high-risk car insurance for drivers who are viewed as riskier to insure. A driver with lots of speeding tickets, traffic violations, DUIs, or at-fault car accidents, for example, may be required to get assigned risk auto insurance.
When you apply for assigned risk insurance, the insurance company cannot reject you: the insurance company sets a price, and any driver willing to pay that price will get car insurance. For some high-risk drivers, this is the only type of car insurance they can receive.
Approximately 1% of car insurance policies across the United States are assigned risk or non-standard car insurance policies. Numbers vary widely between states, however: North Carolina has one of the largest residual markets in the United States, for example, with approximately 15% of auto insurance premiums coming from the residual market.
How Does Assigned Risk Auto Insurance Work?
Each state has its own assigned risk pool, also known as the residual or shared market. This pool is where risky drivers can buy car insurance policies at a high price.
The unique thing about assigned risk auto insurance is that insurers must accept policyholders.
Typically, an insurance company can decide whether or not to insure a policyholder. An insurer might want to insure a safe, low-risk driver, for example, but not a dangerous, high-risk driver. With assigned risk auto insurance, the insurance company does not get to decide.
Under the assigned risk auto insurance system, every insurer must accept a certain number of assigned risk drivers. The number of drivers that the insurance company must accept is proportional to the size of the company.
Drivers can use the assigned risk pool system to get car insurance for all types of vehicles, including commercial vehicles, motorcycles, motorhomes, campers, ATVs, snowmobiles, golf carts, and more.
Types of Residual Markets Vary Between States
Every state has some type of assigned risk auto insurance market. There are four different types of assigned risk auto insurance systems, including:
Assigned Risk Plan: Assigned risk plan systems are found in 43 states and the District of Columbia. These plans are administered through an office created by the state. The plans are governed by a board that represents auto insurance companies licensed in the state.
State Mandated Pooling: Four states (Florida, Hawaii, Michigan, and Missouri) have state-mandated pooling mechanisms. All insurance companies that do business in the state share the premiums outside of the voluntary market (i.e. the assigned risk auto insurance premiums), including any profits or losses from those premiums.
Reinsurance Facilities: Two states (North Carolina and New Hampshire) have reinsurance facilities. Under this system, an insurer decides whether to handle the policy through its ‘voluntary business’ department or transfer it to a reinsurance facility. Insurers are allowed to transfer a certain percentage of policies to the reinsurance facility pool. Any profits or losses from this pool are shared by all insurers licensed in the state.
State-Funded System: Maryland is the only state that uses a state-funded assigned risk auto insurance system. Under this system, private insurance companies do not participate directly in the assigned risk market, although they are required to subsidize any losses from the assigned risk market.
Do You Qualify for Assigned Risk Auto Insurance?
Each state has different eligibility rules for assigned risk auto insurance.
Generally, however, the most important requirement is that you have recently been declined for car insurance within the last 60 days. Some states require you to be declined at least twice, while others only require one rejection.
You can also qualify for assigned risk auto insurance if you can only find car insurance policies offered at a higher rate than the assigned risk pool’s premiums within the last 60 days.
If your assigned risk pool’s premiums are $4,000 per year, for example, and the cheapest car insurance policies you can find are $5,000 per year or more, then you may qualify for assigned risk auto insurance.
Assigned Risk Auto Insurance Prices Are Fixed for Each Driver
Assigned risk auto insurance doesn’t work like ordinary car insurance: the rates are fixed between providers.
No matter which car insurance company you choose, you’ll pay the same rate for assigned risk car insurance.
However, you will not necessarily pay the same rate as other drivers in the assigned risk pool. Your premiums will still vary based on factors like your age, driving record, and ZIP code.
You will also have different policy options in your assigned risk pool. You can choose to save money by going with basic liability insurance, which is the minimum required to drive on the road. You can also get collision and comprehensive coverage for added protection (at an added cost).
The standard assigned risk period is three years. After paying for assigned risk car insurance for three years, you should be able to re-enter the voluntary market.
How to Get the Cheapest Assigned Risk Auto Insurance Policy
Yes, assigned risk auto insurance policy prices are fixed for each driver. However, there are still certain factors that influence the price of assigned risk auto insurance. Some of these factors – like your driving history – are outside of your control. Other factors – like the ZIP code where you park your car at night – can be controlled.
Change your ZIP Code: Insurers charge different premiums based on your ZIP code. Some ZIP codes have higher rates of break-ins and accidents. Changing your ZIP code – say, by moving to a safer neighborhood – can lower car insurance premiums significantly.
Get Basic Liability Coverage Instead of Full Coverage: Assigned risk auto insurance can consist of basic liability coverage or full coverage. Most states only require basic liability coverage by law, and no state requires collision or comprehensive coverage. Insurance plans with only basic liability coverage will be the cheapest available option. If you want cheap assigned risk auto insurance, then look for a basic liability plan. Avoid full coverage plans with comprehensive and collision coverage.
Improve Your Credit: In certain states, your credit score impacts car insurance premiums. Insurance companies use a credit-based insurance score (also known as an auto insurance score) to analyze your risk as a policyholder. By improving your credit, you should be able to lower your car insurance premiums.
Wait: As you get older, your driving history gets more distant. Your at-fault claims fall further into the past. You get older and more experienced. Sometimes, you can drop car insurance premiums significantly just by waiting a year or two.
Final Word on Finding Affordable Assigned Risk Insurance
Assigned risk auto insurance prices are fixed between companies. However, assigned risk auto insurance is still affected by certain factors, including your age, gender, credit score, and policy options. If you want the cheapest possible assigned risk car insurance, then consider getting basic liability insurance, which lets you legally drive on the road at the lowest possible price.
Assigned risk auto insurance is never going to be cheap. By implementing the tips above, however, you can get the cheapest possible assigned risk car insurance.