Each insurance company takes a risk when providing coverage to a person. The risk is to have a client who files claims and cost them more money than they earn from that respective client. Companies make a profit when they insure drivers who are less likely to commit an accident, make claims and always pay their premiums on time.
Insurance companies classify drivers in 3 risk categories, each one with different risk profile:
- Preferred (or Premium). This is the top category and includes the safest drivers. Clients placed in this category do not have any at-fault accident or have been involved in accidents in the past 5 years. Companies prefer drivers with minimal or zero claim history and reward them with better premiums, even for high coverage limits. Paying all premiums in due time and keeping an excellent credit score (above 800 FICO credit score) are also traits of Preferred drivers. Being over 25 years old and buying more than $100k liability is also a must.
- Standard. This category puts the client right in the middle of best and worst drivers. A Standard driver can be promoted to Preferred. Usually, there is just one thing to be fixed in order to get to the next level. Standard drivers have one or two minor traffic violations, a maximum of one at-fault accident, good credit score and at least previous 6 months of insurance coverage.
- High-risk. Worst drivers are placed in this risk category. Usually, these drivers have to work with non-standard carriers or dedicated carriers. Premiums will be significantly more expensive. To be classified as a high-risk driver, a person must have zero or very limited driving experience, to commit a major traffic violation and to have a poor credit score. Being convicted for DUI/DWI will automatically place a driver in this category. People who did not have coverage before are considered high-risk since companies do not know what to expect from those persons.
“Car insurance companies classify drivers based on their risk to file a claim. Safe clients are rewarded with better premiums” said Russell Rabichev, Marketing Director of Internet Marketing Company.
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