If you’ve tried to set up an auto insurance policy and been denied, there are several different reasons that could be at play. Common things like dings on your driving record or credit report, or no credit history, can prevent insurers from approving your insurance coverage, and might also make it harder for you to get affordable insurance rates.
Here are some of the most common reasons people get denied insurance coverage, and some options to consider if you still need a policy.
Can car insurance companies deny you coverage?
Believe it or not, car insurance companies can deny you coverage for many reasons. As with any other type of insurance business, car insurance companies operate on a risk-based model, which means they take statistical factors into account to decide whether you’re a safe bet to insure — or if you might ultimately cost them money.
If a driver’s a relatively safe bet (according to the company’s statistical models) that may mean fewer insurance claims, so insurance companies can charge lower premiums and deductibles. But if a driver has significant risk factors that may result in them filing more claims, then companies will often boost their insurance rates. And if a driver is considered extra risky, then insurance companies can deny coverage altogether.
What if you’re denied coverage?
If you're denied coverage, you still have a few options. First, you can ask for quotes from other auto insurance companies. Each insurer is different, so even if one company denies you coverage, that doesn't mean every other insurer will deny you as well.
What if you still can’t get a policy?If you’ve checked with several insurers and can’t get coverage, try reaching out to an insurance broker who specializes in difficult-to-insure customers. If that's not an option, you can join a state-run insurance pool for high-risk drivers. These insurance premiums are expensive, which is why state-run insurance is known as an "insurer of last resort," but it can allow you to get a policy so you can legally drive.
Once you find a policy, get to work on improving the factors that caused insurers to deny you coverage in the first place. When it comes time to renew, you'll be able to apply for regular, cheaper policies with a better chance of success.
7 most common reasons car insurance companies can deny you coverage
There are many reasons why insurance companies can deny you coverage, but here are seven of the most common reasons.
History of car accidents or traffic violations
If you have a number of at-fault accidents on your driving record, or if you have other negative marks such as speeding tickets, an insurance company can use those as a reason to deny you coverage. It's yet another reason to drive carefully and safely.
If you're having problems with driving, consider taking a defensive driving course to improve your skills, or look into medical treatment if a health condition could be impairing your driving abilities.
Poor credit or no credit history
In most states, it’s considered legal for insurance companies to deny you coverage based on your credit score. This is a controversial practice, and exact rules vary depending on where you live. If you think your credit score is impacting your insurance coverage, there are many things you can do to increase your credit score, or to start building your credit if you don't have a credit history yet.
A few states, such as Hawaii, have outlawed insurers from considering credit scores, so it's illegal for insurers to deny you coverage based on your credit score or history. Some states, such as Maryland, allow auto insurers to use your credit score when setting your rates, but they can’t use it to deny you insurance coverage.
Some other states, such as Washington, are also taking steps to deny or at least limit insurers’ abilities to use your credit score at all. But you might still encounter issues in the meantime.
Insurance companies look at your insurance history as a mark of your driving ability. If you're a first-time auto insurance buyer, such as if you're buying your first car and learning to drive as an adult, some companies will deny you coverage outright.
Even if you've had a driver's license for a long time, you could be denied if you’ve never purchased your own insurance before, or if you've had a gap in coverage. That's because some insurers assume that if you haven't purchased auto insurance recently, you haven't been driving and your driving skills may be rusty.
That's one reason why some people who don't currently have a car, but plan on getting one in the future, purchase non-owner auto insurance. It's relatively affordable, and it can help you get cheaper rates later, if and when you do buy a car and need to purchase an auto insurance policy.
Many insurers assume that if your license was suspended, then you've already demonstrated hazardous driving — even if you didn't necessarily cause an accident. And if it's been a while since your license was suspended, then you also have another factor working against you: Insurance companies may assume your driving skills are out of practice.
Bad driving habits can be hard to break. For example, according to the National Highway Traffic Safety Administration, about one-third of drivers arrested for DUIs or driving while intoxicated are repeat offenders.
Some people get into cars as a hobby, but this can throw a wrench in your insurance plans. If you drive luxury cars or restore old classics, you might have unique insurance needs.
Maybe your car carries a greater risk of theft, or maybe your hot rod would be difficult to repair if it were ever in an accident. Estimating the value of these cars in case you need to file a car insurance claim isn't as straightforward as it is for more common cars.
For reasons such as these, some insurers decline to cover specialty or collector cars at all, although there are custom auto insurance companies that specialize in these kinds of vehicles.
In addition to rejecting first-time policyholders, car insurance companies can decline coverage for you just because you're young. And if you do get insurance, you’ll likely face higher premiums.
Younger people don't have long driving histories to demonstrate their driving skills, and they also may be more likely to take risks. According to neurologists, the prefrontal cortex (the risk-taking area of your brain) isn't fully mature until you reach age 25.
It can be easier to get car insurance as a teen if your parents or a family member are willing to add you to their policy. You can also complete certain driver training courses and maintain good grades in school for a better chance at insurance coverage and affordable rates.
Some regions are harder on cars than others. There are areas with higher rates of theft, or higher rates of weather-related damage from things such as hurricanes or tornadoes. If you live in a high-risk area, some insurers decline to offer insurance coverage for certain events, or even to offer any coverage at all.
Important noteInsurance laws vary quite a lot between states, as do the reasons why auto insurance companies might legally deny you coverage. If you think you’ve been discriminated against and shouldn’t have been denied, you can contact your state's insurance regulator office to get more information.
What does it mean when an auto insurance company denies coverage?
It depends on your personal circumstances. Auto insurance companies can deny coverage for many reasons. Sometimes it's personal, such as if you have too many dings on your driving record or a low or bad credit score. Other times, it has nothing to do with you and may just be a company-wide shift in the types of policies they focus on.
Can insurance companies change their minds and deny coverage if they initially approved it?
Yes, insurance companies can deny you coverage after you've already purchased a policy. This is called a cancellation. But keep in mind there are certain reasons for which insurers can’t legally cancel your policy, such as on account of your race, religion, or a few other protected categories.
What is the difference between a denial and a cancellation?
An insurance denial happens when you request a quote to start coverage, but the insurer decides not to offer you a policy at all. A cancellation is when you already have a policy in place, but your insurer decides to end your policy early (before the end date in your contract).
You might also encounter a non-renewal, which is when your insurer decides not to renew your policy when it ends.
Regardless of why a car insurance company has denied you coverage, it's not the end of the road. Check your rates with more than one of the best car insurance companies and see whether you get approved. If you can’t get through the online quote process, a good insurance agent can speed up this process. And if all else fails, you'll still be able to get coverage through a state-run insurance pool.