Can auto insurance companies deny coverage?

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In a nutshell...

If you own or drive a car, you likely know that you are required to obtain and keep auto insurance.

However, there may be a lot you don’t know when it comes to this area of being a financially responsible driver.

You may even be wondering if you can be denied coverage or how you can get the best deal on auto insurance.

To find the best price on your auto insurance premium, be sure to use an online price comparison tool. With these tools, you can do a side-by-side comparison of several different carriers and policies.

Enter your zip code above to get FREE car insurance quotes today!

The Legal Requirements of Car Insurance

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No matter where you live, you are required to have some auto insurance coverage. There are very few exceptions to this rule.

While the added expense of paying for car insurance can be a burden to some, there are good reasons for drivers to carry auto insurance.

Without coverage, the costs of medical expenses and repair and replacement of damaged property have the potential to be astronomical.

Auto insurance protects you from having to pay these expenses out of your own pocket.

What penalties will I face for not having car insurance?

Not having car insurance can lead to stiff penalties, depending on where you live. Each state has its own laws and regulations regarding this infraction.

In most states, the consequences can include:

  • Jail time
  • Vehicle impoundment
  • Community service
  • Fines
  • Suspension or revocation of your driver’s license
  • Suspension or revocation of your vehicle registration
  • SR22 insurance coverage requirement

In every state, what ramifications will be longer lasting and more serious for each additional time you are caught driving without insurance.

There are consequences that can be applied whether you cause an accident or if you are simply pulled over by a law enforcement officer.

If you do cause damages to other parties, you can also be sued in civil court. This is something that you cannot ignore.

Can auto insurance companies deny coverage?

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For auto insurance companies, the decision to insure a driver or not is all about their risk. The higher the risk they would have to assume, the less likely they are to offer you an insurance policy or offer you one at a decent price.

The following factors can decrease your chances of obtaining an auto policy:

  • Poor credit – In some cases, people with poor credit are less likely to drive responsibly and more likely to file claims.
  • Multiple claims in a short period of time – If past behavior shows what future behavior will be like, insurance companies do not want to sign up for taking on a new customer that will be filing many claims.
  • History of non-payment or late payments – If you have not paid your insurance premium in the past, a new insurance company may be fearful that you will not pay again in the future with them.
  • Policies that were previously canceled by your insurance provider – If you canceled a policy or had a canceled by the car insurance company, a new carrier will likely wonder why and see it as an increased risk on their part.
  • Periods of no insurance – This raises a red flag to insurance carriers who will wonder why you went without coverage.
  • Multiple driving violations – Again, this shows you are a high risk for the insurance company, making them less likely to want to insure you.

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How can I increase my likelihood of getting insurance coverage and paying an affordable premium?

While there isn’t much you can do about your past credit, payment, or driving history, there are positive steps you can take in the right direction to improve your insurability.

These steps include:

  • Improving your credit score
  • Driving safely to avoid accidents and tickets as much as you can
  • Paying your insurance premiums on time
  • Only filing insurance claims when this action is truly necessary
  • Maintaining continuous auto insurance coverage

While many of these factors won’t change your situation overnight, working towards them long term will help

Credit-Based Insurance Scores

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Credit-based insurance scores have been around since the early 1990s. They use certain factors in a driver’s credit history to help predict how likely that the driver is to have an insurance related loss.

This conclusion is because some research shows that there is a positive correlation between credit and insurance losses.

Credit-based insurance scores look at the following factors on your credit report:

  • Payment history – Whether or not you pay your credit bills and pay them on time accounts for about 40 percent of your total credit-based insurance score.
  • Outstanding debt – About 30 percent of your score is related to how much outstanding debt you currently owe.
  • Length of credit history – How far back your credit history goes can also impact whether or not you will be offered and insurance policy and at what rate. This factor accounts for about 15 percent of your score. The farther back your credit history goes, the better.
  • Pursuit of new credit – If you are applying for many new credit accounts, this can make your credit-based insurance score go down by about 10 percent. It’s best to only apply for new lines of credit when you absolutely need them.
  • Your credit mix – Insurance companies also look at if you have a good mix of credit such as credit cards, mortgages, car loans, and other revolving types of credit. This factor is responsible for approximately 5 percent of your credit-based insurance score.

FICO reports that about 95 percent of auto insurance carriers use a credit-based insurance score in determining if they will underwrite an insurance policy for a driver or not.

Are there factors that an insurance carrier cannot use to determine my policy or my insurability?

The good news is that there are certain pieces of information auto insurance carriers are not allowed to access or consider when making their underwriting decision.

By law, there are several factors that auto insurance companies cannot use when determining if they will insure you or not what your premium will be.

Other factors that they cannot use include:

  • Your race, color, national origin
  • Your religion
  • Your gender
  • Your marital status
  • Your age
  • Your income, occupation, or employment history
  • Where your residence is located
  • Any interest rates that you are being charged or have been charged in the past
  • Child/family support obligations or rental agreements
  • Various inquiries into your credit report
  • Whether or not you are participating in credit counseling of any kind

No matter your credit or driving history, you can use a price comparison tool to aid you in finding the best insurance premium quote for your driving and financial situation.

If you are having trouble affording insurance or trouble finding an auto insurance company that will underwrite a policy for you, contact your state’s insurance commissioner.

Enter your zip code below to get FREE car insurance today!

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