Substandard Auto Insurance Companies and Their Costs
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UPDATED: Apr 12, 2020
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Insuring your vehicle with a substandard auto insurance company will cost you more than it would with a standard auto insurance company. Substandard coverage is not for everyone and it should be your goal not to be a driver who needs to get a substandard policy.
Substandard coverage is for those drivers who do not qualify for a policy with a standard insurance company.
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Although drivers who have a standard auto policy may pay high premiums as a result of their driving history, car they drive, or area of the country in which they live, drivers with a substandard policy can be certain that their rates will be very high.
The good news is that most drivers only have to have substandard insurance for a period of time before they may be eligible for standard insurance again.
Substandard vs. Standard vs. Preferred Auto Insurance
If you have a driver’s license and you plan on driving, you will need to purchase auto insurance. Not only is this smart financially, it is a requirement in most areas of the United States.
Not all auto insurance is created equal, however.
When you apply for car insurance, you will need to provide information that will help the insurance underwriters determine how much your rate will be. You will be placed in a category related to what level of risk you present.
There are three levels, or tiers, of insurance risk. The preferred category is for those drivers who have immaculate credit and driving records, and drive a low-risk car. Standard is where most drivers are placed, which refers to drivers with some past and current issues but nothing serious.
Substandard, or non-standard, refers to drivers who have multiple, or serious, traffic violations on their record and may possibly have terrible credit.
The majority of car insurance companies have three risk tiers, although some only have two–one for low-risk drivers and one for high-risk drivers. Other companies may have even more than three categories in which to place drivers.
Substandard Driver Qualifications
There are a variety of things that may cause drivers to be considered so high risk that they are not accepted by standard insurance companies. One is a serious violation on their driving record. This may be reckless driving or being convicted of a DUI.
Another may be having too many tickets or at-fault accidents over the last two to three years.
Drivers who drive a high-performance vehicle may be placed in the substandard category.
This is because sports cars tend to result in more speeding tickets and reckless driving charges. Cars of high value are pricey to fix or replace and may often be the object of thieves or vandals.
Drivers of young age or old age may be considered to be substandard. Young drivers are placed there because of their inexperience, while older ones sometimes lose eyesight, reaction time, and perception on the road.
If you have had a period of time in which you didn’t have car insurance, some insurance companies will consider you to be high risk. This is called a lapse, or gap, in coverage and it is not looked on favorably by insurance providers.
One group of drivers who may sometimes be placed in the substandard category is teenagers. The Centers for Disease Control and Prevention reports that teen drivers under the age of 20 crash four times more than drivers who are older.
Teenage drivers of particularly high risk are males, newly licensed teens, and teenagers who are driving with other teenagers in the car. Insurance rates are already high for teenagers, so to have any other risk factor involved does not bode well for them.
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How to Find Substandard Auto Insurance Companies
If you have applied for car insurance and have been turned down for a standard policy, your next step would be to find a substandard auto insurance company. There are a few options to find one.
Many insurance companies that are larger and service a large area of the country offer substandard policies along with policies for preferred and standard drivers.
Some of these providers include Progressive, Geico, and Allstate. Although they may offer substandard policies, they are not required to accept you as a policyholder. They can turn down your application if they feel you are too big of a risk.
You can also do a search online for substandard auto insurance companies, which are also referred to as non-standard companies. You will be given a list to check out yourself or may even be able to get quotes from a number of them.
If you are in the substandard category and have been turned down by multiple insurance companies, you may feel a little desperate to find a provider that will insure you. This is not the time to be hasty, however. If you find a company that is willing to insure you, make sure you still look into the company thoroughly.
Although it is rare, some companies may take advantage of your situation and offer an opportunity to be insured that seems too good to be true. Incidents of fraud can sometimes occur, as is explained by the Coalition Against Insurance Fraud.
A quick way to legitimize the company is to call your state department of insurance and make sure the company is licensed in your state and is registered to sell car insurance.
Substandard Auto Insurance Costs
Whether you get substandard insurance from a major auto insurance company or through a company that specializes in high-risk drivers, you can expect to pay high rates. Insurance companies take a risk when they insure you, as the chances of you getting in trouble, filing a claim, and costing them money are greater.
Sometimes the perceived risk of insuring a driver is too big to take on. In instances such as these, even a non-standard insurance company can turn you down for a policy. There is another option for you if this happens.
Insurance for Drivers Who Do Not Qualify for Substandard Auto Insurance
If you are turned down for insurance by a non-standard provider, you will be assigned to a state risk pool. In this situation, insurance companies participate voluntarily to insure those drivers who cannot be insured elsewhere. These companies must accept the drivers who are assigned to the pool.
Insurance premiums for risk pools are even higher than for substandard companies. The participating insurance companies either absorb the loss or keep the profit, states the Insurance Information Institute. The coverage you get will often be less, as well.
The coverage offered by an assigned risk pool is usually only the basic liability coverage that your state requires.
This differs from most substandard policies, where you can usually choose full coverage if you prefer. The high premiums plus the limited coverage are two good reasons why you should plan on getting out of this high-risk category as soon as possible.
How to Become Eligible for Standard Auto Insurance
Getting out of the high-risk tier and back into the standard category should be a priority of yours. You should have a pretty good idea as to what placed you in the high-risk category, so work on that issue first and foremost.
If multiple accidents were the reason, focus on driving carefully and defensively, and following all road rules including speed limits. Ask your insurance provider if taking a class aimed at defensive driving or a safety course would help your cause.
If you are substandard because of a DUI, you may be staying in this category for a period of time. While other violations are often cleared from your record after three years, a DUI can stay on as long as seven years, ten years, or forever.
Although you can’t change your age, if you are a teen driver there may be some things you can do.
The National Highway Traffic Safety Administration talks about the Graduated Driver Licensing (GDL) program, which is offered by most states.
Although these states follow the program, none of them follow it exactly. For example, some states require you to have 30 hours of experience driving with an adult before you can get your license. Some insurance companies will reward you if you go above and beyond, such as getting the GDL-recommended 50 hours of driving and getting private instruction. This may help you qualify for the standard category.
If you are in the market for a new vehicle, ditch the high-speed cars and go for one that gets high safety ratings. Look on Safer Car’s site for ideas of vehicles that are approved by insurance companies.
Credit is also a factor in insurance rates. If you have terrible credit, focus on doing things that will be good for your credit so you can start increasing your score.
You should do an insurance re-evaluation every year to see if you can qualify for a higher tier. This will increase your flexibility, as well as save you money.
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