A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 15, 2021

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Important facts to know...

  • You’re required to apply for auto insurance before you’ll be offered the opportunity to buy insurance coverage
  • When you apply, underwriters will review your personal information to determine if you qualify for coverage; this process is also called getting an insurance quote
  • Every carrier has their own eligibility requirements and if you don’t meet them you can be denied coverage
  • Preferred providers and some standard insurers will often deny high-risk drivers with poor records coverage
  • As long as you’re licensed, you will be able to find some sort of coverage through a carrier or a state program in a relatively short time with no issues

You, like many other American consumers, are probably bombarded with advertising on a daily basis from insurance companies that say that you can buy auto insurance for as low as $30 per month guaranteed.

Unfortunately, these commercials don’t really go into the details that tell the viewers that you must have a license, an acceptable record, and a satisfactory accident history to qualify for not just a low rate, but also coverage. It is a violation of your rights not to give you access to that fine print but that doesn’t mean that some of these companies are going to make it easy. Some places are, unfortunately, out for a quick sale rather than to protect you. That is why reading reviews of insurance providers is so important as you shop for coverage.

Insurance is often advertised as a consumer good instead of a financial product.

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Carriers spend millions on advertising to convince you that they have the best product and offer the best service. Unfortunately, the advertisements don’t place a lot of focus on the rating factors or criteria that are used to determine if you’re eligible for coverage. It’s always possible that you could be denied coverage:

Why do you have to apply for an insurance product that’s mandatory?

Buying auto insurance, or getting an insurance quote, is a lot like applying for a credit card. You choose the company like you would choose a card issuer. The carrier will then ask for an application where you provide personal factors that can have an effect on your rate and your eligibility.

If you have bad credit, a low monthly income, or your income isn’t stable, it’s very risky for a credit card company to offer you a high credit limit or any credit limit at all.

It’s the same when you have a bad driving record or several accidents for an auto insurance company. By requiring you to apply for coverage, the carrier can decide if you need underwriting guidelines and how much they’ll have to charge you through their own evaluation criteria.

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What are underwriting guidelines?

Underwriting guidelines are eligibility requirements that need to be met for the representative of the company to offer the applicant coverage. Each insurance company is going to have their own evaluation criteria, though a few basic ones will be consistent across the board.

If a carrier has strict evaluation criteria, all new business applicants must be eligible for coverage before a policy will be issued. Drivers who qualify are insurable in the eyes of the insurer and those who don’t aren’t.

What guidelines usually need to be met to get insurance coverage?

Only some guidelines are dictated by rules that are set by state officials. In some states, it’s illegal for carriers to use an applicant’s age to set rates or determine eligibility. In other states, it’s completely legal to use age.

The guidelines that are used are dependent on the type of carrier you’re doing business with. There are preferred carriers that want to do business with only the lowest-risk drivers, which means those with no accidents and that pay their bills on time, and then there are other carriers that will accept drivers with some tickets and accidents.

Here are some of the common guidelines that are used:

  • The applicant must have an insurable interest in the vehicle
  • The drivers on the policy must all have valid licenses
  • All drivers must not have more infractions than are accepted by the insurer
  • All drivers must not have more at-fault claims than are accepted by the insurer
  • The vehicles must be registered in the state where you’re applying for insurance

As with anything that is required by law, you still have some basic rights when it comes to accessing it. The problem with insurance isn’t the fact that you may not be able to get coverage anywhere, you just may have a hard time finding an affordable quote.

Will you be denied a quote for insurance?

The insurance company never really know if someone qualifies for insurance when they’re asking for auto quotes.

Insurance agents can only go off of the information that the hot lead is providing when they are asking the qualifying questions. All of the quoting questions are asked to help the company and the client avoid wasting time.

If you’re honest with the answers that you’re giving to get your quote, the agent can tell you before you even proceed all the way through the process if you’ll qualify. The best agents will ask about your driving record first just to see if this will disqualify you.

If you say you’ve had a handful of tickets or a combination of tickets and accidents, the agent should let you know that you’ll have to look elsewhere.

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Can you be denied coverage after you have already submitted a payment?

When you buy auto insurance, you haven’t actually purchased a policy until after the policy is issued.

You might submit your first payment right when turning in your application, but that doesn’t mean everything is official. The application goes to a department of underwriters and then several reports are run for verification purposes.

When underwriters run motor vehicle reports and claims reports on each of the drivers in the home, it can change everything.

First off, it can change your premiums when the final rate is determined. Second, it could completely eliminate you from being eligible for the company’s insurance program. When this happens, an offer won’t be extended.

What happens when you’re denied coverage after you apply?

It might feel a bit unfair to think that you can be denied auto insurance coverage after you thought you already purchased a plan.

This is why it’s so important for you to understand how the process works.

If you’re not completely forthcoming when you give your personal information, you could get a denial letter in the mail instead of your declarations page.

When you get a denial letter, it will tell you exactly why your application is being denied. In addition to the reason, the letter will tell you when the coverage afforded under the temporary binder will expire. If you’re owed a pro-rated refund, you’ll get a refund in the mail.

Can you be denied coverage at your renewal?

If you’re insured already, you could be denied the opportunity to renew your policy if you too many tickets or claims during the term. When you’re denied, you’ll get a notice of non-renewal in the mail that says when your current insurance will expire.

It’s frustrating to get denied auto insurance when all you want to do is buy coverage. If you’ve been denied in the past, start shopping for quotes from carriers with more lenient guidelines. Use an online system to enter your information, and get quotes from all of the right companies.

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  1. http://insurance.illinois.gov/autoinsurance/shopping_auto_ins.asp
  2. http://www.tdi.texas.gov/pubs/consumer/cb020.html
  3. http://www.foxbusiness.com/features/2011/05/05/denied-6-foolish-moves-destroy-car-insurance-claim.html
  4. https://www.thebalance.com/what-is-a-high-risk-driver-527253
  5. https://www.edmunds.com/auto-insurance/personal-factors-that-affect-insurance-rates.html
  6. https://www.thebalance.com/what-is-insurance-underwriting-2645778
  7. https://www.thebalance.com/how-long-will-i-be-a-high-risk-driver-527279
  8. http://www.investopedia.com/terms/i/insurable-interest.asp
  9. https://www.insurance.wa.gov/your-insurance/tips/clue.html
  10. http://insurance2.illinois.gov/autoinsurance/auto_cancel.asp
  11. https://www.thebalance.com/maximum-number-of-car-insurance-claims-527117