What Is Standard Auto Insurance?
Standard auto insurance is the auto insurance offered to average-risk drivers. Drivers with only a few blemishes on their driving, insurance, or credit histories usually qualify for standard auto insurance coverage.
Key Takeaways
- Standard auto insurance offers insurance coverage to average-risk drivers who are neither high-risk or very low risk.
- The insurer considers such information as driving record, accident history, vehicle type, car usage, credit history, and location when determining whether to offer coverage
- The information used helps the company estimate the likelihood of the driver getting into an accident, filing a claim, and costing the insurer money through a higher-than-average claim rate.
- If you don’t qualify for standard auto insurance, there are alternatives.
How Standard Auto Insurance Works
Although drivers are required in most states to carry auto insurance, auto insurance companies are not required to cover you as a driver. Accurately estimating the risk in underwriting a new policy is crucial for an insurer, as it can make or break the company’s profit.
If the company prices the insurance policy correctly, understanding the claim risk, it may be profitable. The insurance premiums paid by drivers will exceed the benefits paid.
But if the insurer does not adequately recognize the risk associated with underwriting a particular policy, it can potentially lose money. The insurance company may wind up paying out more benefits than it receives in premiums.
Insurance companies pay close attention to individuals and businesses when determining whether to underwrite a new policy. Insurance companies review various aspects of your driving history and auto before offering coverage to you with a standard auto insurance policy. These include:
- Insurance history: How long you’ve had auto insurance in the United States, any claims made, and lapses in coverage
- Driving history: Any accidents, DUIs, tickets or moving violations, or other indicators of taking risks while driving
- Credit history: Some states permit insurers to review your credit history
- Auto make and model: Some antique, high-performance or very high-value cars may not fit the standard auto insurance policy
The company then compares these driver characteristics with actuarial information, which allows the company to determine how likely it is that you will get into an accident or filing a claim. Based on the information above, insurers may break different applicants into the following groups:
- Preferred: Few to no accidents, excellent driving, insurance, and credit history
- Standard: A few blemishes on your driving, credit, or insurance record
- Nonstandard: Several or many blemishes, may not qualify for most auto insurance policies
New Hampshire does not require motorists to buy insurance, though they must be able to demonstrate they have the financial resources to pay an injured party in the event of an accident. In Virginia, uninsured motorists must pay $500 to the DMV and drive at their own risk.
How to Qualify for Standard Auto Insurance
Standard auto insurance takes into account a driver’s characteristics. Actuarial information compiled from similar drivers’ records determines premium charged.
While a standard automobile insurance policy’s qualifications may vary, requirements often include:
- Maintaining clean driving record
- Many years of consistent auto coverage
- A history of limited or no filed claims
- Good credit
- A contemporary car with safety features
If you don’t qualify for standard auto insurance now, you may in the future as time passes since your last auto accident or claim, if you buy a safer car, or just add more years to your insurance history.
Standard Auto Insurance vs. Non-Standard Auto Insurance
Most auto insurance is standard, but around 40% of new policies are non-standard. These policies are offered by small specialty providers and larger companies, and may cover drivers who have a claims record with many accidents, serious traffic violations, or a history of unpaid premiums. For example, you may only be able to get an SR-22 with a nonstandard car insurance policy, not a standard auto insurance policy.
Nonstandard auto policies can also cover unusual driving histories (a newly arrived immigrant to the U.S. without a driving, credit, or insurance history) or unusual vehicles (high-performance, limited edition sports car) that don’t conform to typical risk expectations.
Non-standard auto insurance premiums are usually higher than standard auto insurance premiums. But if you don’t qualify for standard auto insurance, a non-standard plan is likely your best bet. Your other option is your state’s assigned risk plan.
What is the Difference Between Standard and Nonstandard Insurance?
Drivers who do not qualify for standard auto insurance at a major carrier may be eligible for a non-standard insurance policy. These special policies are aimed at drivers with low credit, poor driving records, or who are otherwise considered too high-risk for a standard auto insurance policy. Non-standard policies tend to have much higher premiums and deductibles than standard policies. As such, they should only be considered as a last resort for drivers who are otherwise unable to obtain coverage
What is the Difference Between a Standard and Nonstandard Insurance Company?
Nonstandard auto insurance companies primarily offer coverage to drivers who don’t qualify for standard auto insurance policies. Several insurers specialize in this market, but some major insurers also offer nonstandard policies, along with standard insurance. To make up for the extra risk the insurer is taking on, the insurance company will likely charge a driver higher premiums for coverage.
What Is the Most Common Car Insurance Coverage?
In the United States, the most common type of car insurance coverage is liability coverage. This is because almost every state requires liability insurance in order to drive a car. Other policies, such as collision, are optional.
The Bottom Line
Standard auto insurance provides affordable, consistent coverage for drivers with an average risk profile. Maintaining a strong history of insurance coverage, safe driving, and good credit can help you qualify for standard auto insurance. If you don’t qualify for standard auto insurance, you’ll need to shop around for nonstandard plans or for an assigned risk plan.
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