By

John Davey

Updated

July 25, 2023

Edited By

Fausto Bucheli Jr

Learn about nonstandard car insurance and how it differs from standard and preferred options. Discover the factors that determine insurance rates and find out how you can transition from nonstandard auto insurance to standard or preferred coverage. A comprehensive guide for licensed drivers to make informed decisions about their auto insurance options.

auto insurance policy
image credit: Vlad Deep

Introduction

As licensed drivers, ensuring we have the right auto insurance coverage is crucial for protecting ourselves and others on the road. However, the world of¬†auto insurance¬†can be complex, especially with the classification of drivers into nonstandard, standard, and preferred categories. In this comprehensive consumer guide,¬†CheapInsurance.com¬†will explore these different tiers of coverage and shed light on what sets them apart. From understanding how insurance rates are determined to practical tips for transitioning between coverage types, we’ll empower you to make informed choices that align with your unique driving history and circumstances.

I. What is Nonstandard Auto Insurance?

Nonstandard auto insurance caters to high-risk drivers who may have a history of accidents, traffic violations, require an SR-22 filing, or poor credit. Insurance companies consider these drivers more likely to file claims, which leads to higher premiums. We’ll delve into the reasons you might need nonstandard car insurance, the factors affecting its cost, and the insurance providers that offer nonstandard policies.

Standard auto insurance is the most common type of coverage, providing protection for drivers with a relatively low risk profile. With good driving records and credit scores, standard drivers enjoy comprehensive coverage options at competitive rates. We’ll explore the characteristics of standard drivers, how insurers determine eligibility, and introduce you to leading insurance providers offering standard policies.

The Need for Nonstandard Car Insurance

Nonstandard car insurance serves as a lifeline for drivers who may face challenges in obtaining standard or preferred coverage. It is specifically designed for high-risk drivers who are deemed riskier to insure by insurance companies. While nonstandard auto insurance may come with higher premiums, it plays a vital role in ensuring that high-risk drivers can still legally operate their vehicles while working towards improving their driving records. Let’s explore some of the reasons you might need nonstandard car insurance and the factors that influence its cost.

Reasons You Might Need Nonstandard Car Insurance:

  1. Poor Driving Record: If you have a history of accidents, multiple at-fault claims, or serious traffic violations, you may be considered a high-risk driver. Nonstandard car insurance provides coverage options for individuals with less-than-ideal driving records, offering them an opportunity to stay on the road while working on improving their driving habits.

  2. DUI/DWI Convictions: Drivers with DUI (Driving Under the Influence) or DWI (Driving While Intoxicated) convictions are often considered high-risk by insurers. Nonstandard car insurance allows these individuals to meet state-mandated insurance requirements and reinstate their driving privileges.

  3. Lapses in Insurance Coverage: Drivers who have experienced lapses in their insurance coverage are also considered higher risk. Nonstandard car insurance can provide coverage to individuals who have faced gaps in their insurance history, ensuring they comply with legal requirements and protect themselves financially on the road.

  4. Inexperienced Drivers: New drivers with limited driving experience may also find themselves in need of nonstandard car insurance until they establish a history of safe driving and build a positive driving record.

  5. Nonstandard Vehicles: Some drivers own nonstandard or modified vehicles that may not meet the criteria for standard insurance coverage. Nonstandard car insurance offers specialized coverage options for these unique vehicles.

Factors Affecting the Cost of Nonstandard Car Insurance:

  1. Driving History: A history of accidents, traffic violations, and DUI/DWI convictions can significantly impact the cost of nonstandard car insurance. The more risky incidents on your driving record, the higher your premiums are likely to be.

  2. Credit Score: In some states, insurance companies consider credit-based insurance scores to determine premiums. A lower credit score may lead to higher nonstandard insurance rates.

  3. Age and Experience: Younger and inexperienced drivers are generally considered higher risk, resulting in higher insurance costs.

  4. Vehicle Type: The type of vehicle you drive can also affect the cost of nonstandard car insurance. High-performance, luxury, or modified vehicles may lead to higher premiums.

  5. Location: Drivers in areas with higher rates of accidents, theft, and vandalism may face higher insurance costs.

Insurance Providers Offering Nonstandard Car Insurance:

Several insurance companies specialize in providing nonstandard car insurance. These companies focus on offering coverage to high-risk drivers and tailor their policies to meet the specific needs of this demographic. Some well-known insurance providers that offer nonstandard car insurance include:

  1. The General: Known for providing coverage to high-risk drivers, The General offers nonstandard auto insurance with flexible payment options.

  2. Dairyland: Dairyland Insurance specializes in nonstandard auto coverage and offers affordable policies for drivers with unique needs.

  3. Direct Auto Insurance: Direct Auto Insurance offers nonstandard coverage for drivers with less-than-perfect driving records and allows customers to customize their policies.

  4. Infinity Auto Insurance: Infinity specializes in nonstandard car insurance and provides coverage options for drivers with high-risk profiles.

II. What is Standard Auto Insurance?

Standard auto insurance is the most common type of coverage, providing protection for drivers with a relatively low risk profile. With good driving records and credit scores, standard drivers enjoy comprehensive coverage options at competitive rates. We’ll explore the characteristics of standard drivers, how insurers determine eligibility, and introduce you to leading insurance providers offering standard policies.

Standard drivers are individuals who are considered to have a lower risk profile by insurance companies. These drivers typically exhibit responsible behaviors and possess certain characteristics that make them desirable to insurers. Understanding the characteristics of standard drivers can help you identify whether you qualify for standard auto insurance and access more affordable coverage options.

  1. Clean Driving Record: Standard drivers generally have a clean driving history with few or no at-fault accidents, traffic violations, or claims. They adhere to traffic laws and prioritize safe driving practices.

  2. Good Credit Score: Insurers often associate a higher credit score with a lower risk of filing claims. Standard drivers tend to have good credit scores, demonstrating responsible financial habits and reliability.

  3. Moderate Vehicle: Standard drivers typically own vehicles that fall within the average price range and are considered safe and reliable. They may drive family cars, sedans, or small SUVs.

  4. Responsible Driving Habits: Standard drivers exhibit responsible driving habits and avoid engaging in risky behaviors behind the wheel. They maintain a safe following distance, obey speed limits, and prioritize defensive driving.

  5. No Recent Claims: Standard drivers have a track record of limited or no recent insurance claims, indicating their ability to avoid accidents and mitigate potential risks.

How Insurers Determine Eligibility for Standard Coverage:

Insurance companies use a combination of underwriting criteria and actuarial data to determine whether a driver qualifies for standard coverage. Underwriting is the process of evaluating an individual’s risk and eligibility for insurance. Insurers assess various factors to evaluate the level of risk posed by an applicant and decide on appropriate premium rates. Here are some key factors insurers consider when determining eligibility for standard auto insurance:

  1. Driving History: Insurers review an applicant’s driving history, including traffic violations, accidents, and claims. A clean driving record with a lack of recent incidents is a favorable indicator for standard coverage eligibility.

  2. Credit Score: Many insurance companies use credit-based insurance scores to predict the likelihood of a driver filing a claim. A higher credit score is often associated with a lower risk profile.

  3. Age and Experience: Older and more experienced drivers are generally perceived as lower risk, leading to potential eligibility for standard coverage.

  4. Vehicle Type: The type of vehicle an applicant drives is considered, as some cars may be associated with higher accident rates or repair costs.

  5. Geographic Location: Insurers factor in the applicant’s location, as certain areas may have higher accident rates or risks of theft.

Leading Insurance Providers Offering Standard Policies:

Several well-known insurance companies provide standard auto insurance policies to eligible drivers. These companies cater to drivers with relatively low-risk profiles and offer comprehensive coverage options. Here are some leading insurance providers offering standard policies:

  1. Allstate: As one of the largest insurance companies in the United States, Allstate offers standard auto insurance to drivers with good driving records and a responsible credit history.

  2. State Farm: State Farm is renowned for providing quality standard auto insurance coverage to drivers with a clean driving history and a moderate level of risk.

  3. Progressive: Progressive offers standard coverage options with competitive rates for drivers who meet their eligibility criteria.

  4. Geico: Geico is known for providing standard auto insurance policies to drivers with good driving records and a stable credit score.

III. What is Preferred Auto Insurance?

Preferred drivers are individuals who are considered the lowest risk by insurance companies. These drivers possess certain attributes that make them highly desirable to insurers, enabling them to qualify for preferred auto insurance. Preferred drivers enjoy numerous benefits, including the lowest insurance premiums and access to the most comprehensive coverage options. Understanding the attributes of preferred drivers can help you strive towards achieving this coveted status and enjoy the perks it offers.

  1. Exemplary Driving Record: Preferred drivers have a flawless driving record, with no history of at-fault accidents, traffic violations, or claims. Their commitment to safe and responsible driving makes them highly reliable from an insurer’s perspective.

  2. Excellent Credit Score: Preferred drivers typically boast an excellent credit score, showcasing their strong financial management skills and responsible behavior. A high credit score indicates a lower risk of filing claims.

  3. Long-Term Insurance History: Preferred drivers often have a long history of continuous insurance coverage without lapses. Their commitment to maintaining insurance coverage demonstrates reliability and responsibility.

  4. Low-Risk Profile: Preferred drivers exhibit a low-risk profile based on various factors such as age, location, and vehicle type. They reside in areas with lower crime rates, drive safe vehicles with advanced safety features, and follow low-risk driving patterns.

  5. Responsible Financial Habits: Preferred drivers are financially responsible individuals who pay bills on time and exhibit stable financial habits. Insurers view them as less likely to default on insurance premium payments.

Criteria Insurers Use to Classify Preferred Drivers:

Insurance companies employ specific criteria to classify drivers as preferred and determine their eligibility for preferred auto insurance. While the exact criteria may vary among insurers, the following are common factors that insurers use to classify preferred drivers:

  1. Driving Record: A clean driving record, free from at-fault accidents, speeding tickets, or traffic violations, is a crucial criterion for preferred status.

  2. Credit Score: A high credit score is often a prerequisite for preferred auto insurance. Insurance companies use credit-based insurance scores to predict the likelihood of filing a claim.

  3. Age and Experience: Preferred drivers are typically mature and experienced drivers who have demonstrated safe driving habits over the years.

  4. Insurance History: Having a long history of continuous insurance coverage without gaps or lapses is highly favorable for preferred status.

  5. Location: Preferred drivers often reside in areas with lower crime rates and a lower likelihood of accidents or theft.

How Preferred Insurance Differs from Nonstandard and Standard Policies:

Preferred insurance stands apart from both nonstandard and standard auto insurance policies in several significant ways:

  1. Premiums: Preferred drivers enjoy the lowest insurance premiums among the three categories. Their exemplary risk profile allows them to access the most affordable rates.

  2. Coverage Options: Preferred insurance policies offer the most extensive coverage options compared to nonstandard and standard policies. Drivers can customize their coverage to suit their specific needs.

  3. Deductibles: Preferred drivers often benefit from lower deductibles, reducing their out-of-pocket expenses in the event of a claim.

  4. Customer Service: Preferred drivers may receive priority customer service and dedicated support from insurers, given their low-risk status.

  5. Eligibility: Preferred insurance is reserved for a select group of drivers with exemplary driving records, excellent credit scores, and a history of responsible financial habits.

Preferred auto insurance represents the pinnacle of coverage, reserved for drivers considered the lowest risk by insurance companies. Preferred drivers benefit from the lowest premiums and comprehensive coverage options. We’ll delve into the attributes of preferred drivers, the criteria insurers use to classify them, and how preferred insurance differs from nonstandard and standard policies.

image credit: Pavel Danilyuk

IV. Understanding How Car Insurance Rates are Determined

Understanding how insurance rates are determined is key to deciphering why you fall into a specific category. Insurance companies assess various factors such as age, driving record, location, credit history, and vehicle usage to calculate the likelihood of a driver filing a claim. We’ll explore the intricacies of these factors, their impact on insurance premiums, and the significance of actuarial information in risk assessment.

Car insurance is a necessity for every driver, providing protection and financial security in case of accidents or unforeseen events. But have you ever wondered how insurance companies determine the rates you pay for coverage? The factors that impact your car insurance premiums can be diverse, ranging from your driving history to your financial health. In this section, we’ll explore the key elements that insurers consider when calculating your car insurance rates, empowering you to make informed decisions and potentially save on your coverage.

Your Driving Record

Your driving history is one of the most crucial factors that insurance companies assess to determine your risk as a driver. A clean driving record with no accidents or traffic violations indicates responsible driving habits, which can lead to lower insurance premiums. On the other hand, if you have a history of accidents, speeding tickets, or other traffic infractions, you may be considered a higher risk, leading to higher insurance rates. Additionally, new drivers without an established insurance track record may also face higher premiums until they establish a history of safe driving.

Vehicle Make and Model

The type of vehicle you drive plays a significant role in determining your insurance rates. Expensive and high-performance cars typically cost more to insure due to higher repair costs and a greater likelihood of theft. On the other hand, cars equipped with premium safety features may qualify for lower rates and potential discounts. If you own a classic or collectible car, you may also face higher premiums due to the cost of repairs and the availability of parts.

Intended Use of the Vehicle

How you use your car and how often you drive can impact your insurance rates. Commuting long distances for work or frequent road trips may result in higher premiums as the more you drive, the greater the chance of being involved in an accident. In contrast, drivers who use their cars only occasionally for pleasure or leisure activities, also known as “pleasure use,” may enjoy lower rates as they pose less risk on the road.

Personal Factors

In addition to evaluating your driving habits and vehicle, insurance companies delve into your personal details to further assess your risk as a driver. Age, sex, and marital status are some of the personal factors that insurers consider. Mature drivers with extensive driving experience tend to have fewer accidents and, as a result, may benefit from lower rates compared to younger, less experienced drivers. Statistically, women are involved in fewer accidents and less severe accidents than men, leading to potentially lower insurance premiums. Additionally, married individuals are often perceived as safer drivers, which can translate into more favorable rates.

Location

The area where you live and park your car significantly influences your insurance rates. Drivers in urban areas with higher rates of vandalism, theft, and accidents generally pay more for insurance compared to those in small towns or rural areas with lower crime rates. Additionally, the location of your parking spot, whether it’s on the street or in a secure garage, can also affect your insurance premiums.

Discount Eligibility

Insurance companies often offer discounts based on specific criteria. For instance, active and veteran armed services personnel and their families may be eligible for military discounts. Discounts for college students, educators, or customers insuring multiple cars or bundling insurance packages may also be available. It’s essential to inquire about potential discounts when comparing insurance quotes to maximize your savings.

Financial Factors

Your financial health and history can also play a role in determining your car insurance rates. Insurance companies may use your credit information to calculate a credit-based insurance score, which helps predict the likelihood of you filing a claim and the potential cost of that claim. Maintaining a good credit score can result in lower insurance rates in some states. Additionally, your previous claims history can impact your rates, as a history of frequent claims may lead to higher premiums.

Potential Ways to Lower Your Car Insurance Rates

While some factors impacting your insurance rates may be beyond your control, there are steps you can take to potentially save money on your coverage:

  • Shop Around: Compare quotes from multiple insurers to find the best rates and coverage options for your unique circumstances.
  • Drive Safely: Maintaining a clean driving record can lead to lower insurance premiums over time, as it demonstrates responsible driving habits.
  • Pay Bills on Time: Timely bill payments, including insurance premiums, can help improve your credit score and potentially lead to better insurance rates.
  • Opt for Safer Vehicles: Consider choosing a car equipped with premium safety features that may qualify for discounts and lower insurance rates.
  • Consider Usage-Based Insurance: Some insurers offer usage-based insurance programs where your rates are based on your actual driving habits, potentially resulting in lower premiums if you’re a safe driver.
  • Bundle Policies: If you have multiple insurance needs, bundling your auto insurance with other policies like home or renters insurance may lead to cost savings.
  • Check for Discounts: Inquire about available discounts, such as military discounts, student discounts, or multi-policy discounts, to take advantage of potential savings.
image credit: Antoni Shkraba

V. How can I move from Nonstandard Auto Insurance to Standard Auto Insurance?

Transitioning from nonstandard to standard auto insurance is a significant step in improving your insurance rates and coverage options. We’ll provide valuable insights into improving your risk profile, taking proactive steps to qualify for standard coverage, and securing more affordable premiums.

Transitioning from nonstandard to standard auto insurance is a significant step towards improving your insurance rates and accessing better coverage options. While it may take time and effort, it is possible to move from the high-risk category to the more favorable standard insurance category. Here are some actionable tips to help you make this transition:

  1. Improve Your Driving Record: The most critical factor affecting your eligibility for standard auto insurance is your driving record. Avoid at-fault accidents, traffic violations, and any other risky driving behavior. Safe and responsible driving over time will demonstrate to insurers that you are a low-risk driver.

  2. Maintain Continuous Insurance Coverage: Keep your nonstandard auto insurance policy active without any lapses. Continuous insurance coverage showcases responsibility and can improve your insurance standing over time.

  3. Attend Defensive Driving Courses: Some insurance companies offer discounts to drivers who complete defensive driving courses. These courses can not only enhance your driving skills but also demonstrate your commitment to safe driving to insurers.

  4. Reduce High-Risk Behavior: If you have any high-risk driving habits, such as driving under the influence or excessive speeding, address these issues immediately. Avoiding risky behavior on the road will improve your risk profile and increase your chances of qualifying for standard insurance.

  5. Improve Your Credit Score: While not all states allow insurers to use credit scores as a factor in setting insurance rates, if your state permits it, work on improving your credit score. A higher credit score can positively influence your insurance premiums.

  6. Shop Around for Quotes: Don’t settle for your current nonstandard auto insurance without exploring other options. Obtain quotes from multiple insurance providers to compare coverage options and rates. Shopping around may lead you to a standard policy with better terms.

  7. Consider Telematics or Usage-Based Insurance: Some insurers offer telematics or usage-based insurance programs that use technology to monitor your driving behavior. If you are a safe driver, participating in such programs can result in discounts and may help you demonstrate your commitment to safe driving.

  8. Seek Help from an Insurance Agent: If you’re unsure about how to transition to standard auto insurance, consider seeking assistance from an insurance agent or broker. They can provide valuable insights, help you understand your options, and find the best policy to match your needs.

  9. Be Patient and Persistent: Transitioning from nonstandard to standard auto insurance may not happen overnight. It requires time and consistent effort to improve your risk profile. Stay patient and persistent in your pursuit of better insurance rates.

VI. How can I move from Standard Auto Insurance to Preferred Auto Insurance?

For those with standard coverage seeking enhanced benefits, transitioning to preferred auto insurance is the goal. We’ll outline the criteria insurers use to determine preferred status and suggest methods for improving your eligibility. From maintaining a clean driving history to optimizing your credit score, we’ll guide you on the path to securing the best rates and comprehensive coverage.

Transitioning from standard to preferred auto insurance is a goal for many responsible drivers seeking the most comprehensive coverage and the best insurance rates. While reaching the preferred status may take time and dedication, it is possible with the right approach. Here are some steps to help you move from standard auto insurance to preferred auto insurance:

  1. Maintain an Excellent Driving Record: Preferred auto insurance is typically reserved for drivers with impeccable driving records. Continue to drive safely, avoid accidents, and steer clear of traffic violations. A clean driving history is a significant factor in achieving preferred status.

  2. Improve Your Credit Score: Insurance companies often consider credit scores as part of their risk assessment. Work on improving your credit score by paying bills on time, reducing outstanding debts, and maintaining a low credit utilization ratio. A higher credit score can enhance your eligibility for preferred insurance.

  3. Bundle Insurance Policies: Consider bundling multiple insurance policies, such as auto and home insurance, with the same insurance provider. Insurers often offer discounts for bundling, making you a more attractive candidate for preferred coverage.

  4. Opt for Higher Deductibles: Increasing your deductibles on your standard auto insurance policy can demonstrate financial responsibility to insurance companies. Preferred drivers often choose higher deductibles as they are less likely to make frequent claims.

  5. Drive Less: If possible, reduce the number of miles you drive annually. Preferred drivers typically have lower mileage, reducing the risk of accidents and claims. If you can limit your driving to pleasure use or shorter commutes, it may positively impact your insurance standing.

  6. Consider Safety Features: Equip your vehicle with advanced safety features such as anti-lock brakes, airbags, lane departure warning systems, and backup cameras. Preferred auto insurance providers value safety-conscious drivers and may offer discounts for such features.

  7. Take Advantage of Defensive Driving Courses: Completing defensive driving courses can not only improve your driving skills but also demonstrate your commitment to safe driving. Some insurance companies offer discounts to drivers who have completed these courses.

  8. Shop Around for Preferred Insurance: While you may have a standard policy with one insurance provider, don’t hesitate to explore other options in the market. Shop around and compare quotes from multiple insurers to find the best rates and coverage for preferred drivers.

  9. Consult with an Insurance Agent: If you’re uncertain about the criteria for preferred auto insurance or how to improve your eligibility, consider consulting with an insurance agent or broker. They can provide personalized guidance and help you find the right insurance company that offers preferred coverage.

Transitioning from standard to preferred auto insurance requires demonstrating a commitment to safe driving, maintaining an excellent credit score, and adopting responsible financial practices. Preferred drivers are rewarded with the best coverage options and the lowest insurance premiums. By maintaining a clean driving record, opting for higher deductibles, and exploring discounts for safety features and defensive driving courses, you can enhance your eligibility for preferred auto insurance. Shop around for quotes from various insurers to find the best policy that matches your needs as a responsible driver. While the transition may take time, the benefits of preferred auto insurance make it a worthwhile goal for any standard driver seeking top-tier coverage.

Auto Insurance Policy application form
image credit: Andrea Piacquadio

Summary

Navigating the world of auto insurance may seem daunting, but with the knowledge of nonstandard, standard, and preferred coverage, you can make informed decisions about your policy. Take the time to assess your risk profile, consider your driving habits, and compare insurance quotes from reputable providers. Whether you’re working towards improving your driving record or aiming for preferred driver status, remember that being a responsible and safe driver can lead to substantial benefits in your insurance coverage. Choose wisely, and protect what matters most on the road ahead.

Quick Look: Nonstandard, Standard, Preferred FAQ:

  • What is the difference between nonstandard, standard, and preferred auto insurance?

    Answer:
    Nonstandard auto insurance is designed for high-risk drivers with a history of accidents, traffic violations, or poor credit. Standard auto insurance is for drivers with average risk profiles, while preferred auto insurance caters to low-risk drivers with excellent driving records and credit scores.

  • Can I switch from nonstandard to standard auto insurance?

    Answer:
    Yes, you can improve your risk profile over time by maintaining a clean driving record, avoiding traffic violations, and continuous insurance coverage. As your risk decreases, you may qualify for standard auto insurance with more affordable premiums.

  • How can I transition from standard to preferred auto insurance?

    Answer:
    To qualify for preferred auto insurance, focus on maintaining an exemplary driving record, improving your credit score, and avoiding claims or violations. Consistent responsible driving and financial habits will enhance your eligibility for preferred coverage.

  • How are insurance rates determined?

    Answer:
    Insurance rates are calculated based on various factors, including age, driving history, location, credit score, and type of vehicle. High-risk drivers typically pay higher premiums, while low-risk drivers enjoy more affordable rates.

  • Which auto insurance companies offer nonstandard policies?

    Answer:
    Nonstandard auto insurance is typically provided by smaller insurance companies or subsidiaries of major insurers. Companies like Acceptance Insurance, Dairyland, and The General are among the recognizable names offering nonstandard coverage.