Are you guaranteed auto insurance?

You are not guaranteed auto insurance coverage from any particular company. But every driver is guaranteed some form of car insurance coverage with the help of their state government if they are denied by private insurers.

Insurance companies can legally deny you coverage based on certain risk factors that vary by state, and your current insurance company is not required to continue insuring you after your policy ends. Car insurance is required by law, however, so all 50 states plus Washington D.C. have a back-up plan called a “residual market” for drivers who can’t find coverage on the open market.

Guaranteed Auto Insurance Through State Residual Markets

Most states use a system that assigns each high-risk driver to an insurance company. This guarantees risky drivers coverage, but it likely means you’ll pay a high price for a minimal policy. The mechanics of these residual markets differ by state.

For example, four states (Florida, Hawaii, Michigan, and Missouri) use a pooling system, which means that all insurers contribute to a fund that pays for high-risk insurance. Others – such as North Carolina, New Hampshire, and Massachusetts – use reinsurance pools, which divide the burden of insuring high-risk drivers based on each company’s market share. Maryland also has its own state-run auto insurance program.

Regardless of the plan type, each guarantees that you’ll be able to get the minimum insurance coverage required by law. To join any of these plans, look up your state’s specific requirements and be prepared with proof of denial by an insurer on the open market. You can also call your state’s insurance department for more information.

Tips For Drivers Who’ve Been Rejected by an Insurance Company:

• Ask other companies for quotes. Every insurer evaluates applications differently, so being denied by one company doesn’t automatically mean you’ll be denied elsewhere.
• Look for a nonstandard insurance company. These companies specialize in drivers considered too high-risk for other insurers.
• Find a classic or collector car insurance company. If your car is too expensive, rare, or sporty for the average insurance company, a specialty insurer might be a good choice.
• Seek help from your state’s residual market. Each state’s high-risk driver pool has slightly different requirements, but having proof of three rejections by insurance companies is usually enough to qualify.

Finally, states have different laws on what insurers are allowed to consider when denying customers. For example, some states forbid insurance companies from considering credit history or gender. So, if you find yourself in that situation, it could be worth looking up the laws in your state and asking insurance companies for the reason(s) they denied you.