Definition of Assigned Risk
Assigned risk is a term used in the context of automobile insurance to describe a group of individuals who are considered too high-risk for insurance companies to voluntarily provide coverage. These drivers typically have a poor driving history, including multiple accidents or violations, making them undesirable to insurers. Due to regulatory requirements, these high-risk drivers are assigned to insurance companies by state law. As a consequence, these drivers are often required to pay higher insurance premiums to mitigate the increased risk they represent.
Examples
- Driver with Multiple Accidents: A driver who has been involved in several car accidents within a short period might be classified as assigned risk due to their demonstrated unsafe driving behavior.
- DUI Convictions: A driver with one or more DUI (Driving Under the Influence) convictions is typically viewed as a high-risk individual and may be placed into the assigned risk pool.
- Serious Traffic Violations: A driver with a history of serious traffic violations, such as reckless driving or driving without a license, may also be assigned to the assigned risk pool.
Frequently Asked Questions
What are assigned risk pools? Assigned risk pools are groups of high-risk drivers that insurance companies are required to cover by state law. These pools ensure that even the highest-risk drivers have access to necessary automobile insurance.
How do states assign high-risk drivers to insurance companies? States often use a rotation system or other equitable distribution methods to assign high-risk drivers to various insurance companies, ensuring that no single company bears an undue burden.
Are insurance premiums higher for assigned risk drivers? Yes, insurance premiums are significantly higher for assigned risk drivers to offset the increased potential for claims.
Can a driver move out of the assigned risk pool? Yes, drivers can improve their driving records over time by avoiding accidents and violations, which may enable them to qualify for standard insurance rates again.
Do all states have assigned risk programs? Most states have assigned risk programs, although the specific mechanisms and regulations can vary from state to state.
Related Terms
- High-Risk Driver: An individual who has a documented history of traffic violations, accidents, or other behaviors that indicate a higher likelihood of future incidents.
- Insurance Premium: The amount of money charged by an insurance company for active coverage of a vehicle over a specified period.
- Auto Insurance Policy: A contract between an insurance company and a vehicle owner that provides financial protection against physical damage or bodily injury resulting from traffic collisions.
- Risk Assessment: The process by which an insurance company evaluates the potential risk presented by a driver to determine the appropriate rate and coverage eligibility.
Online References
- Investopedia: High-Risk Driver Insurance
- Wikipedia: Automobile Insurance
- Insurance Information Institute: High-Risk Drivers
- State Insurance Departments Links
Suggested Books for Further Studies
- “Auto Insurance: A Consumer’s Guide” by Margaret C. Jasper.
- “The Complete Guide to Auto Insurance” by Tyler Jackson.
- “Understanding Risk Management and Insurance” by Harold D. Skipper Jr. and W. Jean Kwon.
Fundamentals of Assigned Risk: Insurance Basics Quiz
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