If you've been labeled "high risk" because of too many auto insurance claims, auto accidents or traffic tickets, your auto insurance company might just drop you faster than Charlie Sheen drops cuss words.
If that happens, your only recourse may be to seek coverage from an auto insurance company specializing in providing high risk insurance for such drivers. And that'll mean considerably more money out of your pocket to pay for the best high risk auto insurance premiums -- as much as 50 percent higher.
Insurance broker Steve Brooks says it’s possible to stay on your car insurance company’s bad side for anywhere from three to 10 years. But that period could last longer if you trip up by exhibiting even more bad behavior, such as racking up several traffic tickets.
But take heart, high-risk driver. Hyacinth Tucker, a spokesman for Allstate, says there are five things you can do to get back in the good graces of your auto insurance company in as little as three years and become a "good risk" driver:
• Ask for a rate review. Although it’s not common, it is possible for insurance companies to make mistakes that could be bumping you up to the high-risk category. For instance, a traffic ticket could be showing up on your driving record when it already was supposed to have dropped off.
• Know your numbers. Check your credit score and compare it with the score your auto insurance company is using to determine rates. Also, make sure errors on your credit report are corrected to help boost your FICO score and, ultimately, knock you off the high-risk list.
• Go back to school. Take a defensive driving course offered through groups like AAA as well as through some auto insurance companies and municipalities. If an auto insurance company sees you’re trying to correct your risky ways, it may be inclined to take you off the high-risk list and drop your rates a bit.
• Be loyal. Don’t constantly jump from auto insurance company to company. Establishing a strong relationship with one company shows you’re stable and aren’t the risk you once were.
• Stay current. Pay your premiums on time. This fosters trust between you and your insurance company.
While not all circumstances are the same, Tucker offers the four most common reasons for being labeled a high-risk driver:
1. Low credit score. A score of 650 or less indicates to an auto insurance company that you're likely to file a claim, be irresponsible with your car (leave it unlocked in a parking lot) or get a traffic ticket.
2. Excessive claims or traffic tickets. This means two or more claims (for damage, theft, vandalism and so forth) or two or more traffic tickets in two to three years, depending on where you live.
3. Insurance hopping. Bouncing from one auto insurance company to another year after year, or changing companies at least three times in five years, shows instability. In this scenario, the insurance company views you as less desirable because it's not collecting premiums from you over an extended period.
4. Lapse in coverage. Going a month or two, or even a few days, without coverage signals that there's a pattern of failing to pay your premiums, even if non-payment is not the reason for the lapse. Regardless of the reason, this situation brands you as unreliable.
“Getting a DUI and having your license suspended or revoked also propel you into the high-risk category,” says Brooks, who is president of B & B Premier Insurance Solutions, an insurance brokerage in Agoura Hills, Calif.
What happens if you’re high risk?
Brooks estimates that if you're deemed a high-risk driver, you'll probably see your rates soar anywhere from 20 percent to 50 percent. Of course, you're pretty much assured that you won't qualify for a good driver discount or any cheap high risk auto insurance.
“To compensate for the rate hike, many high-risk customers change their coverage to include higher deductibles and lower coverage to keep rates affordable or near the level they were before being bumped up to a high-risk level,” Tucker says.
Tucker says a high-risk designation even could lead to your policy not being renewed.
“Car insurance companies often cut their losses if you fall into the high-risk category because of the greatly increased chance they’ll have to pay out on several claims,” Brooks says.
If that happens, you’ll have to shop for non-standard auto insurance -- coverage sold to those who can’t buy affordable car insurance for high risk drivers at standard or preferred rates. Insurance companies like The General specialize in this type of high-risk coverage.
“Non-standard coverage may be similar to traditional insurance for high risk drivers, but you’re going to pay significantly more for that coverage because of the risk you pose to the insurance company,” Brooks says.