Car insurance with liability coverage is mandatory in most U.S. states, with the exception of New Hampshire. Qualifying for coverage isn’t guaranteed, however. Auto insurance companies can deny coverage to drivers for various reasons, and they can also charge high monthly premiums for high-risk drivers.
When Can Car Insurance Companies Deny Coverage?
If a car insurance company denied you coverage, it likely saw you as a high-risk driver. Insurance companies evaluate policy applicants based on a broad range of factors they use to decide whether they will provide coverage and what their monthly or yearly premium costs will be.
The following are among the most significant factors in whether someone gets approved or denied for a car insurance policy.
1. Driving Record
Your driving record is one of the most significant factors in whether a provider will offer you auto insurance. If you've been driving for 10 years without so much as a parking ticket, that's what insurance companies want to see. A history of traffic violations or accidents, particularly if you were found at fault in the accidents, could cause a company to deny your application. Years spent on the road can also affect your rates, since theoretically, the more experience you have as a driver, the safer you are to insure.
A bad record or filing multiple claims where you’re at-fault can also make it harder to get car insurance after a policy cancellation.
2. How Often and How Far You Drive
Insurers may be reluctant to insure drivers who have long commutes or drive long distances frequently. Drivers who spend a lot of time commuting and traveling are at a higher risk of getting into an accident than those who live close to work or don’t use their cars as often.
3. Type of Car
What you drive can determine whether you qualify for insurance coverage. An insurance provider will view someone who drives a nondescript sedan as substantially lower risk than someone who drives a brand new sports car. They may also take safety ratings into account, so keep an eye on recent rankings when you're shopping for a vehicle.
Another thing to look into is if your car model of choice is frequently stolen. Insurance companies can decline to insure vehicles that are known to be targeted for theft, or they can charge high premiums on policies taken out on those cars.
4. Credit Score
You may be surprised to learn that your credit score can affect whether you qualify for car insurance and how much you’ll pay in premiums.
"One of the reasons that insurers are looking at your credit is because at least in their eyes, there is a relationship between having great credit and being very responsible," says Beverly Harzog, a personal finance and credit card expert for U.S. News & World Report. "And responsible people are more likely to follow the laws when they're out on the road driving. They're more likely to pay their insurance premiums on time."
Of course, a low credit score doesn't necessarily mean you're irresponsible. Your score may have dropped after you got laid off and fell behind on bills or when you were out of work for a medical reason. Harzog recommends that if your credit score is low or your credit history reflects late payments and you're worried those will prevent you from getting coverage, you should call insurers directly to explain your circumstances. That doesn't guarantee that they will approve your application, but they may factor those extenuating elements into the decision.
Even if you are not denied coverage because of bad credit, you may pay more for car insurance than drivers with higher credit scores. It's essential to request quotes from several different providers so you can find the lowest rate in your area. MoneyGeek found that Geico and Nationwide offer lower average rates for customers with bad credit than other providers. But rates may vary based on where you live.
5. Financial History
In addition to your credit score, Harzog noted that car insurance companies might also check your credit report to review your payment history and credit utilization ratio (how much you owe vs. your credit lines).
“A car insurance company is a business, and if they’re going to extend someone insurance, they need to rely on that person to be able to pay the premium,” she said.
Harzog also said that having several recent hard inquiries on your credit could be a red flag for insurers. If you’ve applied for several new loans or credit cards, it could indicate that you’re having financial problems, which may signal a lack of responsibility and limited funds available to pay your premiums.
6. Age and Address
Insurance companies can also weigh factors such as your age and where you live in their coverage decisions. A driver in their late teens will likely pay more than a middle-aged driver, while someone who lives near a notoriously dangerous intersection will probably be charged a higher premium than someone who lives in a sleepier neighborhood. If there's been a spike in car break-ins near you recently, you can also expect that to affect your insurance options.
What to Do if You’re Denied Car Insurance
The first step after being denied car insurance is to shop around for a policy and apply with other providers. If you’re not sure what your best options are, you can speak with an insurance broker or contact several insurance companies directly.
Although many providers offer online quotes, you may want to call them to speak with an agent if you have a low credit score or payment issues in your history that you want to explain.
Beyond seeking out other policies, focus on shoring up your credit and your driving habits. If you’re often getting speeding tickets or other traffic violations, become meticulous about following all local driving laws. See about going to traffic school and having some of those points taken off your record. If your credit score is low, prioritize paying down debts and getting those payments in on time. Although these won’t be overnight fixes, they will increase your chances of approval in the future.
Regardless of your driving and credit history, it’s always wise to request quotes from several insurance companies to make sure you’re choosing good auto insurance coverage for you at the right price.
About Casey Morris
- Allstate. "What Factors May Affect Your Car Insurance Premium?." Accessed November 16, 2020.
- Insurance Information Institute. "What determines the price of an auto insurance policy?." Accessed November 16, 2020.