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Assigned Risk Auto Insurance

Written by W. Lane Startin. Posted in Definitions Last Updated: 02/05/2011

What assigned risk auto insurance is, who needs it, how to apply for it, and knowing when to leave it behind.

Too many incidents like this can result in assigned risk.

All drivers are legally required to have auto insurance, but not all drivers have perfect records. Insurance companies recognize this and work to manage their risk by catering to those with tickets, claims, points and other driving blemishes.

But what if you’re convicted of multiple DUIs in a short period of time, or if your driving record is otherwise so bad that you don’t qualify for insurance even with high risk companies? Can you still get coverage?

The answer is yes, but it’s not cheap.

What Is Assigned Risk Auto Insurance?

At the most general level, assigned risk insurance, also known as the “assigned risk pool,” is a state- or regionally-run program that allows people who can’t otherwise qualify to get legally required insurance due to get insurance. The assigned risk concept is most commonly associated with workers compensation and auto insurance. Obviously, we’re only going to talk about the auto insurance portion of it here.

Assigned risk auto insurance programs assign drivers to various insurance companies, which are then required to take them. There’s little choice in assigned risk. You’re compelled to take what’s offered, and the company assigned to your policy is required to underwrite it. Any company which refuses risks losing their privilege to do business in your state, therefore none do.

Although rates and coverages for these policies are dictated by the assigned risk pool rather than the insurance company, they are still very basic and quite expensive. SR-22 filings are included.

In recent years more and more high risk and non-standard auto insurance companies have entered the market. This means that only those with truly awful driving records need assigned risk auto insurance. Indeed many agents will tell you an assigned risk auto insurance application is quite rare indeed.

Applying for Assigned Risk Auto Insurance

Your shouldn’t apply for assigned risk auto insurance unless you absolutely have to. Go through the application process through several different standard and high risk companies first. There is absolutely no point in saddling yourself with assigned risk auto insurance if you can get coverage elsewhere.

Remember, different companies look at different things when considering driving record. Therefore, while one company may consider you too risky, another may not. Also keep in mind companies look at driving records for different periods of time. Some are only interested in three years of driving history, while others will want to know about five.

If you find you do need assigned risk auto insurance, fill out the application with your agent and pay the necessary premium. The agent will then send the application to the pool where it will get assigned. Chances are good your policy will wind up with a different company than the one your agent represents.

Assigned Risk Is NOT Forever

The nice thing about auto insurance driving records is that nothing is forever. If one truly turns the page on bad driving habits, even the worst driver can shed his or her horrendous driving record and become any insurance company’s preferred customer.

If you do have an assigned risk policy, meet with your agent every six months or so to see if you can get qualified with a high risk or even a standard company again. There’s no reason whatsoever to stay on assigned risk even one day longer than you have to.

Non-Owned Auto Insurance

Written by W. Lane Startin. Posted in Definitions Last Updated: 02/01/2011

What non-owned auto insurance is, who qualifies for it, and why it may be a good idea for some drivers to get it.

Sometimes it's a good idea to get auto insurance well before doing this.

What if we were to tell you it might be to your advantage to get auto insurance even if you don’t own a car? Now stay with us here, there’s a method to our madness in suggesting this. There are instances where buying auto insurance before owning a car is actually a good idea.

Many insurance companies fill this need with an auto insurance product called non-owned auto insurance. As the name implies, non-owned auto insurance is auto insurance for people who don’t own a car. It may sound contradictory, but it really isn’t.

What Exactly is Non-Owned Auto Insurance?

Non-owned auto insurance is a liability only auto insurance policy necessarily tied to a driver rather than a vehicle. Because there is no vehicle, there is no full coverage option. Also, only people who don’t own a vehicle are eligible to have non-owned auto insurance. If auto insurance company underwriters find any vehicle titled to you – even if it’s junked and on cinder blocks – your non-owned auto insurance application will likely be turned down flat.

You’ll have to insure that vehicle instead.

Since a non-owned policy follows you, it supersedes any liability coverage that would otherwise apply to the vehicle you may be driving, if any. In other words, if you drive your friend’s car, you don’t have to worry about whether your friend’s liability auto insurance coverage covers you. You have your own. Generally speaking non-owned coverage doesn’t apply to commercial auto insurance situations; that’s a whole other ball of wax entirely.

State liability limit requirements for non-owned auto insurance policies are exactly the same as they are for any other type of personal car insurance. Just because you don’t own a car doesn’t make you exempt from your state’s laws.

Sorry about that.

Good Uses For Non-Owned Auto Insurance

Giving friends and family peace of mind is all fine and good when borrowing their car. But why spend money on auto insurance when you don’t have a car, especially when many auto insurance policies cover third party drivers anyway?

Good question.

For some, that’s reason enough to stay away from non-owned auto insurance. High school and college age drivers who are still on their parent’s policy don’t need non-owned insurance either, even if they don’t have a car to call their own. However, if you’re thinking about buying a car soon and in need of establishing auto insurance history, non-owned auto insurance may be something to consider.

Most standard insurance companies require at least six continuous months of prior insurance history before they will write a policy on you, even if your prior driving history is immaculate. Until then, you have to carry a policy in a high risk or non-standard company. That means higher premiums.

However, since a non-owned policy is necessarily less expensive than a comparable traditional auto insurance policy (reason: there’s no car), it can be a cost-effective way to get the clock started on your auto insurance history sooner rather than later. It counts towards it.

Another reason to consider non-owned auto insurance is for situations such as job applications which require proof of auto insurance. It’s a quick, easy and relatively inexpensive way to fulfill that requirement without visiting a used car lot first.

Collector Car Insurance and Why You Need It

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

What qualifies as a collector car, how is the car insured, and the restrictions that may apply.

Collector Car Insurance: Interior or 50's Car

Why you may need a special policy for your classic car.

What is collector car insurance?  It is an auto insurance policy that is specifically designed to cover cars that are not used for everyday transportation and are considered a collector item or a hobby – like classic car insurance.

Collector car insurance is specialty insurance and it is not offered by all companies.  If your current insurance company does not offer this specialty insurance, you may have to seek out coverage with a company that specializes in this type of policy.

What Qualifies as a Collector Car?

Muscle cars, antiques, imports, rare vehicles and street rods all make up part of the list of cars that can be considered for collector car insurance. The vehicles that people pay beaucoup bucks for because they are rare or that they spent years restoring are the most frequently insured vehicles under this type of policy.

Because the term ‘collector car’ can mean so many different things to different people, it is best to contact your insurance company for more information as to whether your car would qualify as a collector car.

Coverage for Collector Cars

Collector cars are not insured according to a certain value that is found in a book.  Collector cars can be rare and the value of the vehicle is generally not something that can be determined to be the same as every other vehicle that was made in the same time period, especially of that time period was a long time ago.

Instead collector car insurance policies use a stated value or an agreed value to determine the worth of the vehicle in the event of an accident.  Stated value is the value of the vehicle that is determined at the beginning of the policy minus any depreciation during the course of the policy up to the time of the accident.

Agreed value is the more popular method of insuring with collector car policies, at the beginning of the policy the person buying the policy and the insurance company “agree” on the value of the vehicle at the time the policy is written.  If there is a car accident and the agreed value was $53,000, then $53,000 is what is paid if the car is totaled, there is no depreciation with this type of value.

Regulating Collector Car Use

How you use your collector car is strictly regulated by the insurance company. This is why they are able to keep the lower rates that you pay for your collector car insurance down.  Driving restrictions include not being able to use the car for everyday use or commuting to work.   More specifically, your insurance company may place an annual mileage limit on your vehicle, usually around 2500 miles a year.

How you store your collector car is also important. You must keep it in an enclosed garage or storage facility that has a lock on it to keep it safe. You also cannot leave it out on the street or in parking lots for long periods of time when you drive it around.  This is to protect the car from theft or vandalism.

In addition, to make sure that the insurance company has a lower chance of having to pay out on a claim they allow only good drivers to start collector car policies with them.  The driver of the collector car has to have been driving for a minimum amount of years and can only have so many at-fault accident and tickets.

SR-22 Insurance

Written by W. Lane Startin. Posted in Definitions Last Updated: 12/24/2010

Who needs an SR-22, what it is, and how it works with your auto insurance.

Ultimately it's just another piece of paper.

Car accidents aren’t just about claims. On occasion if you’re found at fault in an accident (or even if you’re not) you can be cited by the police. If you’re convicted of certain traffic violations, the court may order you to carry an SR-22 for a specified amount of time.

Admittedly this can be overwhelming at first. Not only do you have to carry auto insurance to stay on the road, but now you have to carry “SR-22 insurance.” You’ve seen agents advertise that before, but what exactly is it?

What is an SR-22?

An SR-22 may sound scary and complicated, but it’s really not. It’s just an insurance liability certificate filed with the state by the insurance company on your behalf, quite similar to the binder your agent sends to the bank who holds your car loan. That’s pretty much it. However, if you’re caught driving without active insurance and an SR-22 filing, the consequences can be severe.

Accordingly, the term “SR-22 insurance” is something of a misnomer. Instead, the term usually refers to auto insurance with a non-standard or “high risk” company. The two are closely associated because if you need an SR-22, it follows you don’t have a perfect driving record. People with less than perfect records, of course, are a non-standard company’s bread and butter. As a result, the majority of people who have to file an SR-22 do so with a non-standard company.

However, people who don’t need an SR-22 may still only qualify with a non-standard company. Conversely, those who need an SR-22 may not necessarily need to insure with a non-standard auto insurance carrier. The two are closely associated with each other, but not joined at the hip.

Getting Insurance With an SR-22

Getting auto insurance with an SR-22 requirement isn’t that much different from getting auto insurance under any other circumstances. You meet with your agent, go over your driving history, and look for the appropriate coverage with a company that will take you. After the policy is written, you tell the agent you need an SR-22 filing. A good agent may ask you first, especially you’re getting a policy with a non-standard auto insurance company or through an assigned risk pool, but it never hurts to remind him or her.

If you’re shopping for insurance online, asking for an SR-22 may be as simple as checking a box. If you already have insurance, just call and ask for the filing. Simple.

An SR-22 filing is commonly done for a small flat fee above and beyond the premium (usually around $25), but once it’s done, it’s done.

Keeping Your SR-22 Valid

Keep in mind an SR-22 filing is independent of auto insurance underwriting requirements. The state will require you to keep minimum liability limits with your SR-22, but they do that anyway. Meet with your agent before every policy renewal to see if you qualify for better rates. If you keep your record clean, you’ll eventually qualify for standard company rates, possibly in as little as six months depending on the situation.

Make sure your SR-22 filing remains active as long as it’s needed. Once you no longer need it, don’t keep filing it. Once the state says you no longer need it, you don’t need it.

Understanding the Multi-car Discount

Written by W. Lane Startin. Posted in Definitions Last Updated: 12/24/2010

What is the multi-car discount, how it’s good for agents, insurance companies and consumers alike, and other things to consider when dealing with it.

Two cars. Yup, they qualify.

Regardless of your driving record or what you drive, when shopping for car insurance you should be on the lookout for one thing: discounts, and plenty of them. While different companies offer different discounts, just about everyone out there has a multi-car discount. In fact, we can’t think of a single major standard auto insurance carrier that doesn’t offer it.

The multi-car discount is beneficial both to you and to the insurance company in several ways. If you qualify for it (and that’s pretty easy: just have more than one car in your household), you should definitely go for it.

Why Insurance Agents (and Companies) Like the Multi-car Discount

Any insurance agent doing his or her job is out there constantly scrambling for new business. At least just as important is retention. Established agents and companies alike make the clear majority of their income on renewals.  From their standpoint keeping clients is just as important as getting new ones.

Insurance companies know their customers are much less likely to drop them if they have more than one policy with them. Therefore, they are keen to do whatever it takes to get those multiple policies. This is the main impetus for companies to offer a multi-car discount.

“Multi-line” companies such as Allstate, State Farm and Farmers take this a step further. By definition, multi-line insurance companies sell other types of insurance such as homeowners, renters and life insurance in addition to auto insurance. Accordingly, they routinely offer additional auto insurance discounts if you buy other insurance lines from them because of the retention factor. This “packaging” philosophy is big deal among multi-line companies. Ask any of their agents.

Why the Multi-car Discount is Good For You

While you certainly can shop around and insure each of your vehicles with different companies, that’s a hassle at best. Wouldn’t it be much easier to find one good company and insure all your vehicles with them? You get a discount for it, so why not?

The multi-car discount usually applies to all vehicles driven by people residing at a common address. This typically includes spouses, but it can also include relatives or friends living with you. It’s not necessary for all the vehicles to be registered to the same person. Each driver in your household can have one (or more) car registered to them.

The multi-car discount is also particularly helpful if you have a teenage driver. Insuring teenagers is invariably expensive, but including your teen and his or her car in your multi-car discount can take quite a bit of the sting out of that. Indeed, it makes no sense for anyone to insure teens on their own when a multi-car discount is available. Some carriers will even qualify them for the discount even if they have to insure with a non-standard company. That is, of course, if they insure with a non-standard company affiliated with the aforementioned carrier. Most companies have at least one.

What’s more, the multi-car discount doesn’t necessary have to involve another “car.” Some companies will allow you to include a motorcycle or recreational vehicle to qualify for the discount. Ask your agent for more information specific to your company.

Other Multi-car Discount Considerations

In order to qualify for the multi-car discount, all of your vehicles need to pass underwriting on their own merit. This can exclude any kit cars, classic cars and commercial vehicles you may own (although other multi-car discounts are routinely available for the latter).

If you’re insuring a lot of vehicles in your household, you may want to consider an umbrella policy as well. An umbrella policy is an inexpensive way to effectively increase your liability coverage in a dramatic fashion, typically in increments of $1 million above and beyond the underlying policy limits. Umbrella policies cover both homeowners and auto policies, although other property and casualty lines may sometimes be included as well. Most companies require minimum underlying limits on the base policies and – of course – require that you have the underlying policies with them.

If you’ve acquired a lot of assets, you’ve also acquired a lot of risk exposure. An umbrella policy helps you cover that risk in an effective manner.

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