What is high risk car insurance? Typically high risk insurance refers to coverages that provide insurance protection for impaired risks, or risks that are under the acceptable standards set by the most preferred insurers in that field. For instance, in health insurance someone who is diabetic is a impaired risk, and insurance policies covering them are called high risk insurance policies. In the car insurance business, one who does not fit the underwriting regulations set by the "standard or preferred companies" is defined as high risk. A building that is left vacant because of water damage is also classified as high risk.


In the car insurance business, high risk operators refer to individuals who are not "preferred risk." Preferred risk is normally set by preferred companies. To understand what high risk is about, it might be a good idea to define the preferred risk ,first.

A preferred risk in the car insurance is a person who scores high on the following factors:  A high score homeowner with a family style life in a low risk neighborhood, with multiple cars and clear driving record. The higher you score on these factors, the more preferred you are! Scoring low on the above factors means that the person is classified as high risk in the car insurance business.

If an individual has a less than perfect driving record, they may believe that they need to go into the 'high risk pool.' That is not always true, however. Here are a few factors to determine if you need one of the available high risk auto insurance policies available today.

Characteristics of High Risk Auto Insurance:

  • Premium is not credit score decided.
  • The limits of liability is too low.
  • Although dubbed 'low cost' insurance, the premium is higher per unit of liability coverage or value of insured vehicle.
  • Customer services and claims are not handled with the same spirit as in preferred situations.

People Who Need High Risk

Typically the only times where a professional insurance agent should suggest high risk policies are the following:

a. When the client does not fit any criterion of preferred or standard companies to the point where he is ineligible for their auto insurance policies. This includes people with DUI or excessive number of tickets and accidents.
b. If purchasing an auto policy with the standard market becomes very cost prohibitive where the client will be driving without insurance as a result. Typical examples of people who belong to this category are people youthful drivers (under age 24) or old drivers (over 70 years) who live on limited budget, but their insurance is too high because of their age. Also, unemployed people with no money may fit here.
c. In some instances where the drivers have international licenses, or foreign licenses such as Mexico license, high risk may be the only solution, as standard and preferred companies will not insure those risks.

Who Should Never Purchase High Risk Policy?
Typically, wealthy people who can afford high protection or high liability policies with preferred companies should never purchase the low liability, high risk policy. Insurance cost should be only one factor, and not the main one. Bear in mind that insurance is to protect wealth, assets and income. So if you have larger wealth, or larger assets, or have big income; or you are expected to belong to these classes in the near future, then you surely do not want to get low cost, high risk insurance.

It is good to remember that high risk insurance policies should be a short-term situation. Constantly look for other preferred or standard policies that fit your changing needs and budget. Here, it is good to recite what most financial planners lecture: Failing to plan is planing to fail in life!

Ed Sneineh, Chicago Auto Insurance Agent since 1989.

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