What are the pros and cons of automobile insurance plans?


Automobile insurance plans, also referred to as assigned risk plans, target high-risk drivers who are otherwise not eligible to purchase a standard car insurance policy. Assigned risk plans exist in almost every state and they ensure that high-risk drivers are not left unprotected in the event of a car accident.

How Automobile Insurance Plans Work

The alternative name of the plans comes from the way they operate: each state assigns automobile insurance companies a certain percentage of high-risk drivers. An insurer's must-accept share of high-risk drivers is proportionate to their share of premiums in the respective state. For instance, if a company writes 8 percent of the premiums of the state, it is required to accept at least 8 percent of high-risk policyholders.

Automobile insurance plans charge higher premiums than standard auto insurance policies. Depending on the risk a driver poses, high-risk premiums can be two, even three times higher than the average. High-risk drivers should be aware that they can always try to lower their premiums by employing some strategies, such as taking advantages of all the discounts and choosing to pay monthly premiums.

Advantages and Disadvantages of Automobile Insurance Plans

Automobile insurance plans were invented in order to provide high risk drivers who could otherwise not qualify for a standard car insurance policy, the chance of obtaining at least some basic liability auto insurance. The principle was: "Since they cannot be banished from the roads, they should at least be able to get liability coverage so that the financial impact on accident victims is minimized."

However, automobile insurance plans have not really had the desired effect. Quite the contrary: the high premiums have the opposite effect of the one intended by the plan, resulting in more and more high-risk motorists refusing to buy any car insurance.

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