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 High Risk Auto Insurance is Designed for  High Risk Drivers


by Ed Sneineh, Chicago Car Insurance Agent

What is high risk insurance? Typically high risk insurance refers to coverages that give insurance protection for impaired risks, or risks that are under the favorable standards set by the most preferred insurers in that field. For example, in health insurance someone who is diabetic is a high risk, and insurance policies covering them are called high risk insurance policies. In the auto insurance business, one who does not fit the underwriting regulations set by the "standard or preferred carriers" is recognized as high risk. A building that is left vacant because of an existing fire damage is also classified as high risk.


In the automobile insurance business, high risk drivers refer to those who are not "preferred risk." Preferred risk is normally set by preferred companies. To understand what high risk is about, it might be a good idea to define the preferred risk ,first.

A preferred risk in the car insurance is an individual who scores high on the following points: (a) Has high score on credit report, (b) stay in low risk neighborhood, (c) has sharp driving history, (d) owns his/her own house, (e) owns many cars. The better you score on these factors, the more preferred you are! Low combined score on the above factors means that the person may belong to the high risk people in the auto insurance business.

If one has a less than perfect driving record, they may believe that they need to go into the 'high risk pool.' That is not always true, however. Here are a few factors to determine if you need one of the available high risk car insurance policies available today.

Characteristics of High Risk Car Insurance Policies:

  1. Premium is not credit score decided. In other words, the price is not influenced by the credit score of the applicant.

  2. Low liability limits. Most high risk, if not all of them, start at the basic state mandatory limits.

  3. While it is called 'cheap' the cost per unit of coverage is much higher than preferred auto insurance.

  4. Customer services and claims are not handled with the same spirit as in preferred situations.

People Who Need High Risk

Typically the only times where a professional insurance agent should suggest high risk policies are the following:

  • a. If the client was unacceptable to the standard car insurance market. This includes people with DUI or extreme number of tickets and accidents.
  • b. If purchasing an auto policy with the standard market becomes very cost prohibitive where the client will be operating with no insurance as a result. Typical examples of people who belong to this category are people youthful drivers (under age 24) or old drivers (over 70 years) who live on limited budget, but their insurance is too high because of their age. Also, unemployed people with no income may fit here.
  • c. In some instances where the drivers have international licenses, or foreign licenses such as Mexico license, high risk may be the only option, as standard and preferred companies will not insure those risks.

Who Should Never Purchase High Risk Policy?
Generally speaking, rich people who can afford high protection or policy with high liability limits with preferred companies should never purchase the low liability, high risk policy. Insurance cost should be only one factor, and not the main one. Bear in mind that insurance is to protect wealth, assets and income. So if you have larger wealth, or larger assets, or have big income; or you are expected to belong to these classes in the near future, then you surely do not want to get low cost, high risk insurance.

Getting a high risk policy should always be a temporary situation for people. Constantly look for other preferred or standard policies that fit your changing needs and budget. Here, it is good to recite what most financial planners explain: Failing to plan for your life is planning to fail in your life!

Ed Sneineh, Chicago Auto Insurance Agent since 1989, former college educator of insurance, & founder of Chicago based Insurance Navy.

posted on Wednesday, April 5, 2017