Reader’s Question:

What is a high risk auto insurance? Why are some insurance policies expensive while some are not?

Bernie

Louisville, KY

Typically, an insurance policy is classified into two: standard and nonstandard. The standard insurance is given to those who have low or average risk levels. If your risk level is low, it means that you have less chances of getting into incidents that could lead to expensive claims. If you have a smaller chance of making a claim, the insurance company would believe that they will make fewer pay-outs; therefore you are given lower rates. That’s why this type of insurance is called standard, because it caters to those regular customers or policy owners who qualify for standard premium rates.

On the other hand, nonstandard insurance, also known as high risk auto insurance, is given to those whose underwriting experiences cause insurance companies to think that they will have bigger chances of making frequent and expensive claims. People belonging to this group are often regarded as high risk drivers; hence, they are given high premium rates.

If you are getting an insurance policy, make sure that you aim for a low risk level. There are several ways of becoming a low risk driver. You could avoid getting a high-end car and get one that is safer to drive and less expensive instead, or you could maintain a really clean driving record. Either way is good as long as you can convince the insurance company that you are a safe driver and that you have less chances of getting into an accident.