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What If I'm Rejected for Car Insurance?

man who is rejected for car insurance weighing his options

Being rejected for car insurance doesn't mean you can't get the coverage you need to legally drive. Don't panic if your application was denied. Virtually anyone with a valid driver's license can get auto insurance if they know what they need and where to look.

Understanding Insurance Rejection

If you've been rejected for car insurance, you're probably labeled a "high-risk" driver.

From an insurance company's perspective, a high-risk driver has a higher than average possibility of filing a claim—and costing the company money—compared to other drivers.

You can even experience auto insurance rejection if you have existing coverage. Companies can decide to cancel or not to renew your policy if circumstances arise that negatively affect your risk level. If your policy has been canceled, you're likely to be categorized as high-risk when applying for coverage with a different company.

Common Reasons for Being Rejected for Car Insurance

While no standard exists for defining high-risk drivers, you're more likely to be rejected for one of the following reasons:

Why It Matters: Having a DUI almost guarantees that you'll be moved into a riskier category, as statistics show that there's a high likelihood of being a repeat offender. According to Mothers Against Drunk Driving, a person is injured every 2 minutes in a drunk driving crash, with an average of 30 people being killed every day. Depending on the laws of your state, a DUI might remain on your record permanently.

Why It Matters: Being involved in numerous collisions or traffic violations demonstrates that you're not following the rules of the road as carefully as you should be. This can make it more likely that you're involved in a claim for which your insurance would have to reimburse you or others. Every state sets a specific period of time that a driving violation remains on your record, though it's typically between 3 and 5 years.

Why It Matters: A low credit score can impact your "insurance score," which is largely based on your credit information. Numerous studies have shown a correlation between low insurance scores and both the number and cost of claims filed.

Why It Matters: If you're a new driver or haven't driven in several years, it's difficult for insurers to determine your risk. If you have little driving experience, insurance companies assume you have a higher risk of being involved in a collision.  

Why It Matters: If you had your previous car insurance canceled because you didn't pay your premium or you drove without insurance for any period of time, you're considered irresponsible and a higher risk to a new company.

Why It Matters: Keeping your car in an area where theft and vandalism occur frequently increases the possibility that you'll file a claim for these types of damages.

Why It Matters: The increased value and higher cost of repairs associated with high-performance cars can make them ineligible for standard coverage. Some insurers also associate these cars with reckless driving. These vehicles are better covered by policies designed for custom and other special types of cars.

If you have an existing insurance policy, your company might decide not to renew your coverage when the term ends. In many cases, nonrenewal occurs due to changes in your driving history or other characteristics that increase your risk, though sometimes this is related to a change in the company's practices.

What's more, if your insurance policy is in effect for less than 60 days, your insurer can cancel your coverage for any reason. However, if your policy is more than 60 days old, your insurance can only be canceled before it expires if one of the following reasons:

  • You don't pay the premium despite reasonable attempts to contact you regarding missed deadlines.
  • You committed fraud on an insurance claim or lied on your application for coverage.
  • Your driver's license is revoked or suspended for any reason.
  • You're diagnosed with a medical condition that makes you unable to drive safely.     

Reasons You Can't Be Rejected

If you've been rejected for auto insurance, you're entitled to find out why you're not eligible for coverage. Laws vary by state, but most don't allow companies to deny car insurance to licensed drivers for any of the following reasons:

  • Age
  • Gender
  • Marital status
  • Sexual orientation
  • Mental or physical disability

In addition, some states don't permit insurance companies to use your driving history or credit score to determine your coverage.

If you think you might have been rejected for coverage illegally, it's important to contact your state insurance commissioner to clarify your state's laws and report a possible violation.

How to Find Car Insurance After Being Rejected

If you've been rejected for car insurance, your first step is to request another quote from a different company. In fact, it's a good idea to solicit several quotes since every insurance company assess risk differently. Try a mix of larger and smaller companies to exhaust all of your options and get several different points of view.

While the process of looking for insurance can be frustrating, don't give up even if you get multiple rejections. If you're caught driving without insurance, you could be subject to fines, license suspension, impoundment, and possibly even jail time. This also can complicate your chances of getting traditional coverage at reasonable rates in the future.

You can expedite the process of finding coverage after being denied by exploring a few different options.

Look for high-risk policies       

Many insurance companies specialize in providing "high-risk" or "non-standard" policies. This type of coverage is intended for drivers who've been denied claims or traditional insurance for legal reasons such as bad driving histories and poor credit.

Qualifying for high-risk insurance means you might have limited options since it's not available from every insurer. You can expect to pay higher than average for high-risk insurance, though comparing quotes can help you find the best rate.

Get insurance through your state assigned risk pool

The state assigned risk pool is a last resort for the most difficult-to-insure drivers. To qualify for your state assigned risk pool, you typically have to prove that you've been rejected a set number of times, depending on your state's laws. Most policies offered through state assigned risk pools provide the minimum coverage required to legally drive in that state.

In practice, most states don't offer insurance directly to drivers in the risk pool. Instead, most use a system in which insurance companies pool together to share the risk of insuring otherwise uninsurable drivers. The state assigns a specific number of drivers to each company, based on the amount of business the company conducts in the state. The companies are then obligated to accept these drivers, along with the risk that comes with providing them coverage.

You can find out more information about your state assigned risk pool by contacting your insurance commissioner.

Ask a family member to add you to their policy

You may be able to avoid the state assigned risk pool by sharing an insurance policy with your parents or another family member in your household. It especially helps if they have a clean driving record. While your higher risk will still be reflected in their policy pricing, it likely won't be as expensive as the one you'd purchase alone.

Improving Your Eligibility for Car Insurance

After you settle on a policy that allows you to drive legally in your state, you still have more work ahead. If you're purchasing coverage from a state assigned risk pool or a high-risk insurer, you're likely paying higher than average rates for minimal coverage.

It's important to work to reduce your risk so you can qualify for extensive coverage and competitive rates in the future.

Qualifying for traditional coverage can help you save money on premiums and get you the type of policy that protects your assets and provides financial security. Here are some strategies for improving your eligibility for traditional auto insurance:

Maintaining a clean driving record can help you prove that irresponsible driving is in your past. Watch your speed limits and drive defensively to reduce the likelihood of moving violations and collisions.

A defensive driving course can improve your skills and help reduce your risk. Upon completion, make sure you get proof to show your insurer.

While not directly related to driving, improving your credit score helps to raise your credit-based insurance score. Paying bills on time and lowering your credit card balances can make a big difference.

A safe, standard-model car will help decrease your risk for reckless driving or high repair bills on insurance claims. If you can't part with your high-performance car, consider purchasing a low-cost car for daily use.

Most insurance companies only consider your most recent driving history and look back no further than 5 years. If you maintain a good driving record while on high-risk insurance, you'll eventually earn the right to qualify for more affordable, standard coverage.

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