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Posted December 10th, 2012
Insurance companies look to insure risks that they can understand and underwrite for a profit by accurately predicting the losses that will occur. For the majority of auto insurance companies they would want a “preferred” risk which many define as a responsible driver. An example of that type of risk would be someone with a clean driving record, a great insurance score, and no accidents. Some preferred companies will accept a little deviation from this perfection, but the more the deviation, the greater the cost to the insured (in dollars for coverage).
Non-standard auto insurance companies look for risks that do not fit the mold of the preferred driver. They are comfortable underwriting risks that are not perfect, but still can be underwritten to a profit. For example, a preferred company most often would not care to write an insured that had been convicted of a DUI (driving while under the influence). A non-standard company would not only write insurance on that risk, but would also routinely make a profit because they understand the factors that lead to accidents beyond simply having incurred a DUI/DWI.
Because non-standard auto companies are able to underwrite and design coverage effectively, they are able to price competitively. So much so, that in some cases their rates are priced below the standard market. But these lower rates can come at a hidden cost. Some non-standard policies do not carry the same levels of coverage that a standard policy might. Deductibles could be significantly higher and coverage limits can be much lower. Policies might have restrictions that “standard” policies don’t have.
Your local independent insurance agent can help you compare the coverage that would be appropriate for you and your family. He can point out the coverage gaps and help you decide home much of the risk you’re willing to participate in.
While there is a difference between non-standard and preferred auto insurance the most important thing to know is how much service and coverage you are getting for your dollar.
Insurance is no different that any other product in that different “manufacturers” have different ideas of what the consumer wants and needs. Often you get what you pay for.