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Your complete guide to Assigned Risk Plan

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Assigned risk policies are car insurance for drivers deemed by most insurers to be too costly to protect. Established by state governments, allocated risk policies provide coverage by ordinary carriers, but cost more than normal car insurance. Assigned risk plans are not for any car owner who has been refused coverage.  

Car insurance is available in most states. Although you cannot register a car without it. Basically, if you have it and then lose it, you can lose your driver’s license. For companies, you may even lose valuable contracts if you do not have car insurance coverage. For specific individuals and companies who have multiple claims or poor driving histories, an Assigned Risk auto insurance policy may be the only alternative available in addition to self-insurance. 

What is an Assigned Risk Plan?

Some insurers specialize in non-standard plans tailored for drivers who have difficulty having car insurance due to bad credit or traffic violations, such as DUI. Yet, not all vehicle owners meet the underwriting requirements of firms selling high-risk car insurance. 

Accordingly, to meet the insurance needs of drivers who insurers have turned down, states have developed assigned risk plans that offer insurance coverage through a pool of insurance providers. These schemes encourage car owners to get insurance, but allocated risk plans charge far higher premiums than the voluntary market’s policies. 

Assigned Risk Plan driver
Are you eligible for an Assigned Risk plan as a driver?

Workings of an Assigned Risk Plan

In 44 states and the District of Columbia, allocated risk plans function under the Auto Insurance Plan (AIP) model. AIP distributes applications to insurance providers based on each insurer’s market share in the voluntary market of the State. The insurer writes and assigns liability plans to the services in the same manner as standard auto policies. 

Florida, Michigan, and Missouri employ a Joint Underwriting Association (JUA) model. In this model, voluntary market providers send delegated risk applications to a select number of policy service insurers. New Hampshire and North Carolina mandate all auto insurance providers to write and service risk-assigned auto insurance policies but authorize carriers to pass ownership of insurance policies to Reinsurance Facilities (RF). 

How does an assigned risk plan work?

When do you need an Assigned Risk Plan?

Having one or more high-risk factors does not mean that you will need to purchase an assigned risk package. These policies are intended to offer coverage for individuals who various car insurance companies reject. Prevalent factors which may lead the insurers to reject the applicant include: 

  • Bad credit: In fact, people with poor credit have more auto insurance claims. Poor credit will make it harder for you to get auto insurance coverage. 
  • A poor history of driving: Violations such as imprudent driving or driving under alcohol can lead to severe consequences for your driving record.  
  • Insurance history: People with a history of making claims or not paying their premiums may not be eligible for voluntary market insurance. 
  • Location: In general, insurance providers shy away from writing plans for vehicles in high-crime regions. 
  • No driving experience: The risk plans allocated can also include the only coverage source for specific teenage or new adult drivers. 
  • Specialty cars: Some insurance carriers do not cover specialty vehicles such as antique or custom vehicles. If you are refused coverage on the voluntary market, you may need to purchase insurance via an assigned risk plan. 

How to get out of an Assigned Risk Plan

Looking to work your way out of the need for an assigned risk plan? Fix any problems that could have caused insurers to deny your regular insurance application. If you have bad credit, you need to boost your credit score. Disqualified for lack of driving experience? Drive safely and re-apply to a standard policy after you’ve established a strong history of driving. In short, there are ways to get yourself out of this coverage.

Types of drivers who need Assigned Risk Plan

Consequently, insurers typically consider traffic offenses that have happened in the last three to five years. In summary, by preventing more infringements, you can increase the odds of getting a cheaper car insurance policy. 

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