5 reasons your car could be uninsurable

Insurify researched why insurance providers may not insure a car and how people can avoid being put in that position.

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Auto insurance is one of the most common types of insurance in the U.S. Nearly all state require drivers to have liability car insurance covering a minimum amount of property damage and bodily injuries resulting from accidents.

If a crash happens, the laws are clear that uninsured drivers are themselves financially responsible for any damage or injury. States determine penalties for violating car insurance laws. Depending on the severity of the offense, penalties can include fines up to $1,500, driver's license suspension, vehicle impoundment, and even imprisonment, depending on the state.

However, while car insurance is necessary to drive in most states, some vehicles may be considered too risky for insurers to cover. Insurify researched why insurance providers may not insure a car and how people can avoid being put in that position. The common reasons include poor driving history, past attempts at claim fraud, vehicle modifications, and driving an improperly imported car. The list is based on data from the Insurance Research Council, the Insurance Information Institute, and other industry sources.

Your driving history

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- Too many at-fault accidents or violations make insurers wary.

Poor driving history is a top reason drivers can face challenges obtaining auto insurance. A track record of collisions, traffic violations, or DUI convictions can make getting coverage difficult and extremely costly. Insurers consider drivers with such records high-risk; some may deny coverage altogether.

When companies do insure such drivers, they charge higher fees. The average annual car insurance premium in the U.S. is $1,668, according to a report by Insurify. However, the cost can be much higher for drivers with a poor driving history due to a "risk premium." For example, a driver with a recent DUI can expect an increase of up to 80% in their annual premium for at least three years, according to Experian.

Keeping a good driving record will go a long way toward reducing your premiums and the likelihood of being denied coverage.

Your claims history

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- Too many claims or fraudulent claims make insurers nervous.

A record of excessive insurance claims or past attempts at insurance fraud indicates a higher risk of future claims, often prompting insurers to deny coverage.

A 2017 Verisk study estimated that auto insurance companies lose $29 billion annually because of premium leakage, a significant portion of which is attributable to fraudulent claims. The practice is especially damaging to the industry, considering insurance companies apply higher rates universally to all customers, meaning innocent drivers end up paying the price of someone else's fraud.

Maintaining a clean driving record and steering clear of insurance fraud are essential for keeping your rates down.

Car modifications

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- Modifications, alterations, or customizations can make your car harder to insure.

One of the primary reasons insurance companies dislike aftermarket vehicle modifications is that they may increase the risk of accidents. Certain alterations can worsen the vehicle's handling, braking, and overall performance on the road, such as installing oversized rims and tires, lowering the car by shortening suspension springs, and adding on larger mufflers or rear spoilers.

Customized cars are often more attractive to thieves, leading to a higher risk of carjacking and theft. As a result, insurance companies may charge higher premiums or even deny vehicle coverage with such customizations.

Car owners should always consult with their insurance providers before making any modifications to ensure they remain adequately covered.

Antiques and imports

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- Gray-market cars and antique or rare vehicles can also pose a challenge to insure.

It is generally difficult to determine the accurate value of antique vehicles, as they often have unique features, limited production, or historical significance. Without a solid idea of what they're worth, these cars can be hard for insurance companies to determine how to cover.

Similarly, gray-market cars—which their manufacturers never offered for sale in the U.S. and are brought into the country outside of manufacturers' and dealers' import channels—often fall short of local safety and emissions standards, making them riskier to insure. 

Buying a new vehicle from a dealer or ensuring the used car you're buying was originally bought in the U.S. is crucial for preventing any potential insurability issues.

How you use your car

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- Using your car for commercial use can make it uninsurable; lying or omitting information can get your insurance canceled.

Using your personal vehicle for commercial purposes, such as deliveries, runs the risk of making it uninsurable.

The Insurance Information Institute states personal auto policies are not designed to cover the risks associated with commercial use, such as ride-sharing, because injuries suffered by a paying passenger would likely not be covered under a regular policy, which covers noncommercial passengers in your car. Lying or purposefully omitting information about commercial use can lead an insurer to cancel your insurance policy, leaving you financially vulnerable in the event of an accident.

Be upfront with your insurance provider and obtain the appropriate commercial auto insurance coverage to protect yourself, those around you, and your vehicle.

Story editing by Jeff Inglis. Copy editing by Paris Close. Photo selection by Lacy Kerrick.

This story originally appeared on Insurify and was produced and distributed in partnership with Stacker Studio.




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