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Assigned Risk Pools

The auto insurance industry typically has a three-tiered system for labeling drivers according to the risk they present to insure: preferred, standard and non standard policies. For a small percentage of drivers, none of these three tiers is appropriate, because they cannot get an auto insurance company to agree to take them on as clients. Yet by law in most states, every driver has to have auto insurance. For this reason, most states have come up with a concept called the assigned risk pool, a way to get these drivers insured and on the road legally.

Definition of Assigned Risk

In taking on any particular driver under their protection and selling them a policy, an auto insurance provider is basically volunteering to take on the risk associated with insuring that driver. For this reason, insurers have many methods of calculating risk based on a number of factors. All of these disparate factors combine to form your own personal insurance risk profile. In essence, all the pertinent data the insurer has on you determines what kind of risk they believe you pose as a customer. Things like your driving and claims record, and your tendency to pay your premiums on time, all work together to create this profile.

An assigned risk situation exists when no insurer is willing to take on the risk of insuring someone; that is, you are eligible to enter an assigned risk pool when you can demonstrate that you have had a certain degree of difficulty in getting coverage the normal way, which is through simply contracting coverage with an insurer, who agrees to take on the risk of covering you in exchange for a predetermined price. If no one is willing to voluntarily cover you, someone is assigned the risk of having you as a customer. Assigned risk programs exist in over forty states in the U.S.

Risk Pool a Last Resort

The specific criteria for participation in an assigned risk pool vary by state. Some require that you submit evidence of having been turned down for auto insurance coverage by multiple companies within a certain time frame. But generally speaking, the criteria are similar in that they all must involve a driver's inability to get into an auto insurance plan through conventional methods, due to insurers' unwillingness to take on the risk. An assigned risk pool has to be looked upon as a last resort when it comes to auto insurance coverage. In recent years, the percentage of drivers assigned to these risk pools has dwindled as more and more auto insurers have focused their efforts on providing coverage for high-risk drivers. The expanded market for high-risk or non standard policies has helped many who would have previously had to enter assigned risk pools to simply purchase non standard coverage.

Assigned risk pools truly are a last resort for drivers. Anyone having trouble finding coverage should be encouraged to seek out all their options, including specifically contacting non standard specialists, prior to deciding on this option. However, if a driver is forced to go this route and there are no alternatives, it is not the end of the world. The amount of time you must spend in an assigned risk pool is usually limited, often to three years. If you keep up with your payments and are accident free, normally you should be able to get coverage through more conventional means by the end of your term in the pool. In fact, although companies who are assigned to cover you have to keep you as a customer for a minimum period of time determined by the state, you are still free to shop around and switch coverage if you can find someone who will take you on as a customer.

How the Risk Pool Works

In order to enter a risk pool, you have to meet qualifications mentioned above. To get yourself into your state's pool, you submit a form or other paperwork certifying your inability to find coverage, usually through an agent who then forwards the information to the state. You are assigned a provider who is forced to give you a policy. In some states, assigned risk pool drivers can only purchase the state minimum levels of coverage, although this is not always the case.

Your rates as an assigned risk pool driver are preset based on your record. They will not vary based on which company is assigned to you. This means that if you have five accidents and three tickets on your record, you will pay more than someone with only three accidents and no tickets. Each insurer that sells auto coverage in the state will have to participate in the assigned risk program; the ones who do the most business in-state will have to cover the most assigned risk program drivers. The rates you pay will certainly be higher than in any other coverage situation, but they will be entirely based on your profile and will have nothing to do with the individual company who gets assigned to you. The idea behind states requiring the assigned risk program with insurance providers is that in doing so, they can keep down the rate of uninsured motorists on the roads by giving every driver an avenue by which to purchase legally binding coverage.

Even though you sometimes do not have a lot of coverage options as a car insurance customer in an assigned risk pool, there is one advantage you will get out of the arrangement. While you are in the pool (i.e. the three-year period or whatever length of time dictated by the state), your provider cannot cancel you. Therefore, it behooves you to take full advantage of this fact and use the time during which you are in the pool to clean up your driving and insurance record. Stay safe on the roads, keep up with your payments and take care of your credit rating and other issues which may be negatively impacting your insurance profile as a driver.

At the close of the three-year period, the auto insurance provider assigned to you is permitted to choose to cancel you or non-renew your policy. If this is the case, as long as you have kept up your obligations while you were in the program, you usually will be able to find coverage elsewhere. In a lot of cases, you will have no problem getting coverage with a non standard auto insurance specialist. But before you pursue this option, take a look at some standard providers and just find out for sure whether you might qualify. Again, getting into the assigned risk pool is not the end of the world. But it should be a wake-up call telling you that you need to make some changes in your driving behaviors.

Assigned risk pools are certainly not the best place to land for auto insurance customers. If you find yourself being denied coverage over and over again by different providers, though, an assigned risk policy may be your only option, at least for the time being. If you are having trouble getting even non standard coverage, take a look at your state's assigned risk system and get yourself covered.

 

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