Being labeled a high-risk driver often leads to significantly higher insurance premiums, added fees, and limited coverage options, all of which can put ongoing pressure on your budget.
As one of the 242 million licensed drivers in the United States (ConsumerAffairs), you know how important driving is in your everyday life. Whether you're commuting to work or school, taking leisurely weekend trips, or driving for a living, the convenience of getting behind the wheel and heading to your destination is unparalleled.
However, driving comes with a lot of responsibility, especially because you are sharing the road with other motorists and pedestrians. If you're not careful, you can quickly find yourself categorized as a high-risk driver, a situation that can impact you in many ways, including financially.
What Does It Mean to Be a High-Risk Driver?
To understand what it means to be a high-risk driver, it's important to explore the relationship between the motoring and insurance industries.
An undeniable fact of the road is that accidents happen, often involving more than one vehicle. When this happens, the driver(s) have to be compensated for their injuries and property damage, and that's where insurance comes in.
Almost all states legally require drivers to carry a specified minimum liability insurance for bodily injury and property damage. While the minimum coverage amounts vary from state to state, the point is that, typically, an at-fault party's insurer should issue compensation to victims in the event of a road accident.
Insurance companies are in the business of making money, which is why they categorize drivers according to their likelihood to file a claim and price their premiums accordingly.
What Factors Make You a High-Risk Driver?
Insurance companies use a myriad of factors to assess the risk associated with insuring a driver. They include:
Inexperience/Age
Getting licensed to drive shows you can competently maneuver a motor vehicle on a public road, but it takes some experience to strengthen your skills and develop your sense of awareness on the road.
Insurers know that due to inexperience, young or newly licensed drivers are prone to accidents. In fact, according to the CDC, the risk of vehicle accidents is higher among drivers aged 16-18, with a crash rate that's three times higher than that of drivers older than 20.
Crash risk is highest in the first month of licensure. If you're a young or inexperienced driver, completing an additional driver's education course and choosing the right car can go a long way in securing you lower premiums.
Negative Accident History
Causing an accident (being found liable) is enough to make your insurer pay closer attention to your record. While being at fault for one accident may not necessarily cause a major spike in your premiums, multiple accidents will definitely get you categorized as a high-risk driver, and the cost of getting insured will hurt.
Serious Traffic Convictions
You needn't cause a vehicle crash to build a negative driver history. Getting convicted of driving under the influence or while intoxicated, dangerous driving, or racing on public roads is enough to earn you a conviction in a court of law, and consequently, a high-risk driver status, even though you have never been involved in a crash.
Minor convictions, such as speeding tickets and running red lights, don't carry as much weight, but rack up enough of them, and you'll soon be classified as a high-risk driver.
Vehicle Type
The value of a vehicle has a direct impact on its insurance cost, but beyond that, some types of vehicles can attract even higher rates.
High-performance vehicles, for example, pose an increased risk of accidents, especially in the wrong hands, and are more expensive to repair.
How a High-Risk Driver Status Hurts Your Finances
Higher premiums are the direct consequence of being a high-risk driver.
In the U.S., the national annual average cost of car insurance is about $2,100, according to a CNBC news report. However, your premiums can surge well over 50% if you are forced to buy high-risk auto insurance.
In high-cost states like California, your premiums can double, and in worst-case scenarios, earn you a rejection during renewal.
When that happens, you might need to purchase SR-22 insurance, which is a DMV requirement for high-risk drivers to prove financial responsibility or that they hold at least the minimum liability coverage.
If you're in this situation, go to sr22savings.com for insurance premium savings.
High-Risk Driver Status Can Hurt Your Income
If you drive for a living or even as a part-time job, being a high-risk driver can ruin your job prospects.
For starters, high-risk insurance rates will eat into your profits, reducing your take-home pay. This will make effective budget management a pipe dream.
If you're unable to get your car insurance renewed, you'll be out of a job, as it's illegal to drive an uninsured car in most states.
Frequently Asked Questions
How Long Does High-Risk Driver Status Last?
Driving violations aren't permanent. Depending on your state, your insurer, and the violation, it could stay on your record for anywhere from 3 to 5 years.
If you're a high-risk driver, your best path to regaining a lower-risk status is keeping a clean record over a few years.
Can You Switch Insurance Companies as a High-Risk Driver?
Yes, you're within your rights to switch insurance companies at the expiration of a policy or even after cancellation. It could be a smarter move, since insurers assess risk differently, and you may secure lower rates at a new insurer.
Does Credit Score Affect Car Insurance Rates?
Most insurance companies use credit scoring models to determine car insurance premiums. While having a bad credit score doesn't mean you'll be assessed as a high-risk driver, improving the score can mean more affordable premiums.
Can a Defensive Driving Course Lower Insurance Premiums?
Possibly, especially for young, inexperienced drivers. Completing a certified defensive driving course can lower your risk of getting into accidents, translating to better premiums.
Mitigate the Financial Repercussions of Being Labeled a High-Risk Driver
Driving comes with several risks, some out of your control. Insurance is an effective risk management tool for most of these risks, but if you're labeled a high-risk driver, your cost of insurance can skyrocket and ruin your personal finances.
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