Decoding the Mysteries of High-Risk Car Insurance

Geoff Williams

Twice this year, Iowa Gov. Terry Branstad made minor headlines when his official vehicle was pulled over for speeding. He was fortunate. On both occasions, someone else was behind the wheel and cited with a ticket. If Branstad had been in the driver's seat, he would now be sweating each time his foot hits the gas. It's that third ticket - in a short span of time - that sometimes triggers your insurance company to qualify you as high-risk driver.

You don't want that to happen.

There are three types of car drivers, as far as the insurance industry is concerned: preferred risk, standard risk and high risk. It can be easy to forget about that last one, if you've been paying preferred- or standard-risk premiums for some time. If you're considered a high-risk driver, your payments can go up two, three and sometimes four times the amount a comparable preferred-risk driver would pay. Unfortunately, how the industry defines high-risk insurance isn't exactly cut and dry, since formulas and definitions vary widely among states and insurance companies. So if you're curious about how one becomes a high-risk driver, and how to avoid becoming one, here's the deal.

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Some of it is the luck of the draw. Besides the fact that you drove through a restaurant instead of using its drive-through, or whatever your bad driving incident was, how you get labeled a high risk-driver may depend on what state you live in and who your insurer is. Because insurance is regulated by each state, there is no national standard indicating how many moving violations you can get before you become a high-risk driver.

It also comes down to the standards of your insurance company, according to Dan Weedin, a Seattle-based insurance consultant who advises insurance buyers and was previously an underwriter and agent. What will bother one insurance company may not bother another, he says.

The formula insurance companies use to classify someone as a high-risk driver is a bit of a mystery, says Joel Ohman, a Tampa, Fla.-based certified financial planner and founder of

He says the high-risk driver designation varies by each company's classification formula, "which they like to keep as proprietary as they can for competitive reasons," he adds.

Nevertheless, Ohman says some insurance firms specifically target high-risk drivers while others make it clear that they aren't interested. "Think of the companies that target safe drivers by offering discounts if they go for a certain number of months accident-free," Ohman says.

Some of it depends on points. Most states have a points system, or at least something close to one. When a police officer cites you for an infraction, points land on your driver's license, which can cause your insurance rates to rise, especially if you rack up enough to be classified as a high-risk driver.

While you might find another insurance company that will offer you lower rates - and you should shop around - there's little to no chance you could go to another insurance company that won't learn about your past. "Everyone knows your driving history," Weedin says. "With technology today, it's like your medical record. It follows you around."

And all of it depends on how you've been driving. No surprise: You'll typically be labeled a high-risk driver if it's determined you were at fault in a car wreck, and especially if people were injured. And if an insurance company learns about a DUI, you will be designated a high-risk driver. In that case, assuming your license hasn't been revoked, you'll usually see more than your rates go up (generally triple to four times the amount, most experts say). You may also need a CR-22 or FR-44 form.

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Your insurance company will fill the form out for you, and it's apparently a straightforward, quick process. The form verifies that you have auto insurance liability coverage, and it generally means you were convicted of driving under the influence, reckless driving, or perhaps you were driving previously uninsured and got into an accident.

Those infractions can pile up. Even if you haven't been endangering lives, if you've been cited a few times in the past few years, you should start to be concerned. "The rule of thumb is a combination of three," says Weedin, who explains that you're typically labeled a high-risk driver if, within three years, you have three moving violations - for instance, a speeding ticket, running a red light and making an illegal U-turn.

Of course, your insurer may not see the illegal U-turn as a major problem, and perhaps it would take a fourth violation such as another speeding ticket to put you in the high-risk category. But if your infractions are starting to add up, you don't want to push your luck - and you may want to look into taking a state-approved driver's education course to bring down your points.

Even bad luck could count against you. Let's say a deer ran into your car, and a few months later, a car sideswiped you and you were found not to be at fault. Another month later, your car slid on some ice and into a telephone pole. Although you may be having a run of bad luck, those types of accidents can collectively label you an at-risk driver, according to Jack Taylor, a professor of retailing at Birmingham-Southern College in Birmingham, Ala., who has done extensive teaching and academic research on insurance issues. "The repeated history is enough of a red flag to pick up attention," he says.

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Teenage drivers can make you feel like a high-risk driver. The good news is that adding a teenager to your policy won't automatically make your rates double - but the bad news is that it can. But most insurers offer discounts of anywhere from 15 to 35 percent if your teenager maintains a B average in school. Many insurers also will lower your premiums if the student takes an insurer-approved driver's education program, and it also helps if he or she drives a car that's considered a safe model.

There is good reason for insurers to be concerned about teen drivers. All younger drivers are considered a risky bet for the insurance industry: According to the Centers for Disease Control and Prevention, teenagers from 16 to 19 are more likely than any other age group to crash. And information from the Insurance Institute for Highway Safety shows that male teen drivers are almost twice as likely to die in a crash as female teens. As you can imagine, if your teenager is involved in just one accident, especially if he or she was at fault, you can expect your rates to climb significantly. Two accidents, and you'll probably be told your teen is being dropped from your policy.

How to get labeled as a standard- or preferred-risk driver. "Really, the only way you get off of it is to be a better driver. Stop having moving violations and especially having wrecks," Taylor says. "It's that simple. Typically, you can expect to be on these lists for about five years, depending on how bad your record is."