7 Reasons Why Your Auto Insurance Application May Be Denied
When you’re shopping around for a new auto insurance policy, how much the policy will cost is likely your top concern. However, drivers are often surprised to learn just how easy it can be for them to have their insurance application denied entirely.
If you are considered a high-risk driver through the insurance carrier’s evaluation, you may find your application rejected. At Berry Insurance, we understand that jumping through the hoops to apply only to be met with a resounding no can be frustrating (to put it lightly).
While insurance carriers will assess risk differently and judge each applicant individually, there are still common reasons insurers choose to reject applicants looking for coverage. In this article we’ll outline the top reasons you could be denied auto insurance coverage, and what you should do if your application is rejected.
Table of contents:
- Driving record
- Age
- How you use your vehicle
- Insurance score
- Address
- Type of vehicle
- Insurance history
1. Driving record
When reviewing your auto insurance application, insurers will inspect your driving record to see if you are a risk behind the wheel. Your history as a driver will be one of the most important factors insurers will use to judge your application.
Having a string of traffic violations or accidents, especially recent ones or those you were found at fault for, could be enough for an insurance company to deny your coverage application. Also, if your license has been suspended or revoked, carriers will likely not approve your application.
If you are not outright denied coverage, your driving history could still cause your policy rates to increase. To know more about what goes into the cost of your policy, read our guide on how much car insurance costs in Massachusetts.
2. Age
In addition to their driving record, insurers will judge a driver’s age when deciding to approve or deny their application. This is because younger drivers, such as teen drivers, are more likely to be involved in accidents when compared to older or more experienced drivers.
While insurance carriers will assess risk based on age differently, most insurers will deem licensed drivers “experienced” after 5-6 years of driving experience. Drivers without this level of experience may find themselves charged higher premiums on their auto insurance policy, or be denied coverage altogether.
Younger applicants may not be the only ones finding it more difficult to be approved for affordable coverage, as elderly drivers may be charged higher premiums or have their coverage denied as they age. To some carriers, older drivers present more of a risk to insure, as older drivers may cause more accidents.
However, some states prohibit insurance providers from denying auto insurance for discriminatory reasons, such as the age of the applicant. Massachusetts in particular limits insurers from basing their decisions on personal factors like age, marital status, occupation, and more.
3. How you use your vehicle
Believe it or not, where you drive your car could actually limit your insurance prospects. In addition to how often you drive your car, some insurers are reluctant to insure applicants who will frequently drive long distances.
So, if your daily commute requires you to travel long distances, cross state lines, or operate your vehicle late at night, you may find it difficult to get approved coverage when compared to commuters who live closer to work.
Additionally, drivers who are operating their vehicle for business may open themselves up to greater hazards that won’t be covered by a standard auto insurance policy. In some instances you may be eligible to endorse your policy to include a “business use” rating class, otherwise you may need coverage from a separate business auto policy.
Business use of your personal vehicle can also include any rideshare services - like Uber, Lyft or GrubHub. For more information on insurance options for this type of business use, check out this article: What is Rideshare Insurance Coverage? (for Uber, Lyft, GrubHub).
4. Insurance score
Insurers use this three digit number to help predict the risk of a client and the likelihood they will file a claim. Individuals with lower insurance scores tend to cost insurance companies more, marking them as a higher risk to insure.
Insurance scores are heavily swayed by your actual credit score, as insurers have seen correlation between low credit scores and a higher likelihood of filing insurance claims. In addition to your credit score, insurers will use several factors to determine your insurance scores, including: claims history, payment history, any recent bankruptcies, and more.
However not all states use insurance scores the same way, as some will restrict insurance companies from basing their decision to approve policies based on the score. Massachusetts, for example, does not allow carriers to base their underwriting, premium rates, or decision to renew a policy based on credit based scores like insurance scores.
For a further breakdown on insurance scores, read this guide: What Are Insurance Scores? (And How They Influence Your Insurance Policies)
5. Address
Some carriers take your address or where your vehicle will be parked/garaged into consideration when reviewing your application. Applicants who live in areas with higher rates of car break-ins, theft, or vandalism may have a harder time getting approved for auto insurance coverage.
Insurers may be hesitant to cover you if you live near a busy intersection prone to auto accidents, as they would consider the risk of you being involved in a crash too high.
Also, living outside an insurance company's coverage area is a quick way to be denied coverage, making it important to check what states and areas the company you’re applying to works with.
6. Type of vehicle
Since insurance carriers are risk-averse, they may decline coverage for applicants looking to insure certain models of cars. This includes high end sports cars or collector models that could be prone to theft or expensive repairs/replacements.
However, every type of car will have its associated risks to insurers, even a basic SUV or sedan. While it may not be the only deciding factor in whether your policy is approved or not, it can contribute to the overall calculation insurers will make when deciding the risk to insure you.
7. Insurance history
Finally, if you are not a new policyholder and have a history of other auto insurance policies, carriers will look through your history to see if you would be a good fit.
Insurance carriers may be quick to deny coverage to policyholders that have had their auto policy canceled for non-payment in the past, or if they owe their previous carrier money.
What can I do if my auto insurance application is denied?
If you are initially denied auto insurance coverage after applying, you’re likely wondering what options you have for coverage. Since nearly all states will require you to carry auto insurance to legally drive, you’ll still need to receive coverage through other carriers or options.
If you aren’t informed why your application was denied, working with your trusted insurance agent or broker can help to determine the reason for your coverage denial. Occasionally applicants can simply be denied due to lack of information or misunderstanding - meaning reapplication may be possible with the same carrier.
After addressing the areas we mentioned above, we recommend reapplying for quotes from other insurers. If your risk is too high for standard coverage means, you may need to look into insurers that specialize in high-risk drivers.
Coverage on the go
Ensuring you have coverage while on the road is an important (and legally required) step for any driver to take - which is why getting denied coverage at first can feel so frustrating.
Now that you know how insurance carriers will be assessing your risk as a driver, you can hopefully address those areas and reapply for coverage accordingly. If you need a review on what goes into obtaining a quote, check out a guide on what information you need to provide to receive a personal insurance quote.
With insurance prices rising, it’s important to know how you can save money on your policy if your application is approved. For our best cost-saving tips, read this article: 13 Ways to Save On Your Auto Insurance.