Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate drivers about...

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Reviewed by Laura Walker
Licensed Agent for 10 Years

UPDATED: Mar 25, 2019

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There are times when a driver has such a poor performance record behind the wheel that he has a difficult time purchasing conventional insurance from a private car insurance company.

Under most state laws, that driver still has a right to insurance as long as the court has not taken away his license and his ability to register vehicles. For this type of driver, a special entity, sometimes referred to as a state auto insurance company, exists.

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For the purposes of this article, state auto insurance companies refers to state entities that have created high-risk insurance pools for drivers who cannot get car insurance through conventional means. Please don’t confuse the term with two well-known insurance companies: State Farm and State Auto Insurance Company.

Both of these companies are privately owned and completely unrelated to the government entities of which we’ll be speaking.

How a State Auto Insurance Company Works

When a driver is unable to obtain a standard car insurance policy due to excessive tickets, accidents, or other behaviors, his state may step in and offer some assistance through what’s commonly known as a high-risk pool.

States administer their high-risk pools differently, but there are some general components that are common among all of them.

First is the fact that they are funded through contributions from insurance companies licensed to sell all policies in that state.

Auto insurance company contributions really translate into customer contributions. In essence, all of us pay a little more in our monthly insurance premiums to fund high-risk pools for drivers who cannot obtain insurance any other way.

That’s not to say such high-risk drivers don’t pay for their insurance; they actually pay significantly more than most of us. But the cash being contributed by insurance companies is what allows high-risk pools to have enough in reserve to make good on claims.

In most states, the high-risk pool doesn’t provide the insurance itself; choosing instead to assign high-risk drivers to licensed insurance companies for them to be covered. In exchange for doing so, the state underwrites the insurance policy so the assigned company doesn’t assume any risk–thus the term “state auto insurance companies.”

Examples of State Insurance Entities

In the state of Texas, the high-risk pool is known as the Texas Automobile Insurance Plan Association.

According to the Texas Department of Insurance, the association exists as a safety net of sorts, allowing high-risk drivers to still obtain auto insurance despite their past histories.

According to their website, drivers who obtain insurance through the association, and maintain a clean record for three years, have a legal right to purchase lower-cost insurance from their current carrier rather than paying the higher rates demanded by the risk pool.

In Massachusetts, the high-risk pool is known as the Massachusetts Auto Insurance Plan. They are a little different than other states in that average insurance companies selling policies for private passenger vehicles must participate as providers under the plan.

They have no choice and must do so. But the high-risk policies they write are underwritten by the state high-risk insurance pool.

Types of Drivers That Need This Coverage

There are several different types of drivers who may be required to use a state high-risk insurance pool, not the least of which are those convicted of DUI/DWI. Using Massachusetts as an example again, a DUI/DWI conviction remains on a driver’s license in that state for up to six years.

During that time, car insurance companies do have the legal right to deny a driver a standard auto insurance policy simply because driving under the influence represents too high a risk. As long as that conviction remains on his record, a driver will have to obtain insurance from the high-risk pool.

Another common scenario sees drivers with point issues having to obtain high-risk auto insurance.

To understand point issues, consider the fact that some states start out by issuing you a clean license, only to add points to it whenever you’re convicted of a traffic violation.

Most states are like New Jersey, which starts out at zero and adds points accordingly. However, there are a small number of states that don’t utilize an accumulation system. They start out at a given plateau and subtract points.

Hawaii and Kansas are even more unusual in that they scrapped their points systems in order to alleviate some of the pressure being put on criminal courts. In these states, minor traffic violations are mostly considered civil issues rather than criminal.

However, each infraction is still recorded and kept on a person’s driving history for a certain number of years. Too many of them could result in a driver being assigned to a high-risk pool.

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Higher Than Normal Rates

Some people who find themselves in a position of having to get insurance through a high-risk pool are surprised when they find out how much the premium is going to be. The surprise usually comes from a misconception about how insurance works.

Drivers assume that insurance is like a product you buy at the grocery store: different brand names, but all relatively the same price. That’s not how insurance works.

The price you pay for car insurance is heavily influenced by how likely you are to have an accident or a violation. The more likely this is, the higher your premiums. Charging higher premiums is the only way an insurance company can protect itself against significant financial loss in the event that you cause an accident that seriously injures or kills another person.

When a driver is assigned to a high-risk pool, it is assumed that driver is more likely to have such a serious accident. And, in fact, it’s been proven statistically to be so.

That’s why it’s important for drivers to keep their records clean if they don’t want to end up in a high-risk pool, paying exorbitant amounts for car insurance.

Getting out of the Pool

If you currently find yourself having to obtain car insurance through a state auto insurance company, rest assured that your situation doesn’t have to be permanent. You can get out of the high-risk pool by driving safely and legally until everything is erased from the record.

Even at that, you probably want to continue safe driving practices once your record is clean so that you don’t incur higher rates again in the future.

All of this is made possible due to the principle of “stacking.” This principle involves the virtual stacking of accidents and violations on your record in the same way you would stack papers.

For most of us, that means throwing new papers on top of the pile and getting those we need by fishing them out of the bottom.

That’s exactly how accidents and violations are kept on your record. New ones are added to the top while old ones are pulled out from the bottom.

For example, let’s just say you are convicted of a speeding violation this year. If the law in your state allows for that conviction to be carried on your record for three years, any new violations would be thrown in on top of it.

But after the three years pass, the original speeding conviction disappears from your record permanently. As you can see, if you behave yourself after a conviction you will eventually have a clean record.

Permanent Parts of Your Record

There are a small number of states where repeated DWI convictions, and things like vehicular manslaughter and leaving the scene of accident, become a permanent part of your record. That’s because these infractions are considered felonies rather than misdemeanors.

However, these states don’t allow insurance companies to deny coverage based on these convictions after a certain period of time has passed.

For example, if your state had a seven-year limit on similar offenses, an insurance company could not deny you coverage based on a DWI conviction after that seven-year period ends. They can’t even charge you a higher rate based on that conviction.

Nonetheless, it stays on your driving record because it is such a serious violation.

Other Considerations

In wrapping up, it’s important to make note of the fact that you can be forced into a high-risk pool in some states even if you have no serious infractions on your record. How so? You could be a driver with a history of allowing coverage to lapse for lack of payment.

Such a history, combined with a poor credit rating and one or two minor infractions, could be enough to allow insurance companies to deny coverage. If you’re rejected by multiple companies for these reasons, you may be forced into the high-risk pool.

For details regarding these other considerations, you should consult with your state insurance department or department of motor vehicles. This is one area of the law that can be confusing to drivers and they should understand it.

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