None one knows what will happen in the future. We are always at risk but insurance, at least, provides us with a form of security. Most insurance policies advertised in the market these days are for low-risk individuals. However, many people in Canada fall into the category of high-risk insurance, which can make finding proper coverage frustrating and challenging.
This article will discuss what high-risk insurance is, who needs high-risk insurance, and the pros and cons of high-risk insurance.
What is high-risk insurance?
High-risk insurance is also known as non-standard coverage. High-risk insurance is for individuals that are considered a higher risk to insure than other people for different reasons. For example, one of the main sectors of the high-risk insurance business is the auto industry, and another is life insurance policies. However, as you will see, high-risk insurance can apply to people in a variety of situations.
Who needs high-risk insurance?
Someone with poor repayment history
People who have not made their insurance payments will likely become only eligible for high-risk insurance. Missing your payment may end with the company cancelling your policy, which will be marked on your insurance record. Then in the future, when you try to re-apply for insurance, you will be put in the high-risk category and may run into difficulties finding affordable coverage.
Inexperienced, young, or poor drivers
Some main reasons that a person might only qualify for high-risk insurance is if they have been in multiple at-fault accidents, have too many claims on their driving record, have a DUI, or are extremely inexperienced or young. If an insurance company sees too many of these elements show up on a driving record, they can automatically place the person in the high-risk category.
This placement will increase your premiums and reduce your payment options since they usually want one year upfront and won’t offer monthly installments. If you are only eligible for high-risk insurance because of your age or inexperience, consider adding an already established driver to your policy, such as your parents.
Individuals having several claims
Similarly to having too many auto claims, homeowners who have made several claims about their properties to their insurance company may see their policies go up. Suppose an insurance company thinks that there are too many claims being made under a particular policy. In that case, the insurance company might decide to transfer the person from low-risk insurance to high-risk insurance.
Having a vacant home
According to insurance companies, a ”vacant home” is a home where the owner is not living and has no future plans to live. A vacant home could also mean a newly constructed house where the owner has not yet lived.
Most insurance companies set a time limit for vacant homes; for example, they typically allow a ten-month grace period. If owners exceed that time limit, they are not eligible for standard coverage and will have to look into high-risk options.
A homeowner with multiple mortgages
Homeowners that have multiple mortgages are deemed not suitable candidates for low-risk insurance by insurance companies. Since they have numerous properties to take care of and cannot inhabit all homes simultaneously, they are typically only eligible for high-risk insurance.
Someone with poor credit history
One thing insurance companies will consider when deciding if you fall into the low-risk or high-risk category is your credit score. If your credit score is poor, you have a greater chance of increased premiums and restricted policies. Working on your credit score over time, coupled with perfect repayment history, could result in your premiums going back down.
What are the pros and cons of high-risk insurance?
The best thing about high-risk insurance is that it is highly customizable because insurance companies curate the policies according to the needs of the individual.
A negative to high-risk insurance is that it will typically have higher premiums and may only offer you restrictive payment plans such as annual rather than monthly installments. However, depending on the needs of the individual, high-risk insurance could be more flexible and allow them to do what they want while being covered.
For example, an elderly couple may purchase high-risk insurance so they are not only covered but so are their rental properties and other assets. High-risk insurance is sometimes the only option for people who are turned down for low-risk insurance.
Insurance is a necessity for our day-to-day lives. No one expects to get in an accident or have something happen, but at least you can be covered when they do. For those who currently only qualify for high-risk insurance, they can make it a goal to build up positive insurance history so they can be eligible for low-risk insurance again one day.