Standard Auto Insurance Definition

What Is Standard Auto Insurance?

Standard auto insurance refers to the most basic auto insurance offered to drivers who fall into an average risk profile. The standard coverage will usually be the least expensive type of auto insurance available to the driver. Drivers with a clean driving record and a minimal number of claims filed in their past will usually qualify for standard auto insurance.

Key Takeaways

  • Standard auto insurance policies provide the minimum level of liability coverage required by law.
  • The premiums for standard auto insurance polices is based on actuarial information from the driving records of drivers similar to the person seeking coverage.
  • The insurer considers such information as gender, age, marital status, driving record, accident history, vehicle type, car usage, credit history, and location when determining coverage costs.
  • The information used helps the company estimate the likelihood of the driver getting into an accident, filing a claim, and costing the insurer money through a higher-than-average claim rate.
  • Most insurers also offer additional coverage, for a higher fee.

Understanding Standard Auto Insurance

Standard auto insurance is the basic or lowest level of coverage available from an insurance provider. The regulations in most states require a driver to carry liability insurance and will determine the exact dollar value of coverage needed. Liability insurance will cover bodily injury and property damage claims resulting from an accident that is primarily the fault of the insured individual.

This insurance covers the expenses of only the other driver or property owner who received damage due to the error of the insured driver. Auto liability insurance will not cover the policyholder driver.

In addition to standard auto insurance, other types of insurance, such as comprehensive and collision, may be available at an additional charge to the standard policy. These coverages offer extra protection for the policyholder. Collision insurance reimburses the insured for damage sustained to their personal automobile due to the fault of the insured driver.

Many drivers have this type of insurance as an extension of a standard policy. Comprehensive coverage is for damage to a consumer’s car from causes other than a collision, such as damage from a tornado, vandalism, collapsing garage, or dents caused by a run-in with a deer.

Also, it is essential to understand that most collision and comprehensive insurance policies have separate deductibles. As with all insurance, a deductible is an amount that the consumer must pay out-of-pocket before the insurance company pays.

There are only two states that do not require motorists to carry liability insurance: Virginia and New Hampshire. However, both states have additional requirements for uninsured drivers.

How to Qualify for Standard Auto Insurance

Standard auto insurance takes into account a driver’s characteristics. Actuarial information compiled from similar drivers’ records is the basis for the premium charged.

To qualify for a standard automobile insurance policy, a driver must meet specific basic requirements. These qualifying requirements often include a clean driving record and a history of limited or no filed claims. Further, the type of vehicle a driver owns can also affect the availability of access to a standard insurance policy. An auto insurance company will rate drivers on different categories of risk, including age, gender and credit history.

How Are Auto Insurance Premiums Determined?

The ability to accurately estimate the risk in underwriting a new policy is crucial for an insurer as it can make or break the company's profit. If the company prices the insurance policy correctly, understanding the claim risk, it may be profitable, as the premiums will exceed the benefits paid. Conversely, if the insurer does not adequately recognize the risk associated with underwriting a particular policy, it can potentially lose money. In this case, the insurance company may wind up paying out more benefits than it receives in premiums.

Insurance companies pay close attention to individuals and businesses when determining whether to underwrite a new policy. In the case of auto insurance, the insurer will consider the driver’s age, gender, marital status, driving record, accident history, vehicle type, car usage, credit history and location. They will compare these driver characteristics with actuarial information.

The actuarial information allows the company to determine the likelihood of the driver getting into an accident, filing a claim and costing the insurer money through higher-than-average claim rates. The insurance company uses this information to set the premium charge for coverage. However, all factors do not receive equal weighting. The driving record, age and gender carry more weight than do marital status or credit score.

Your insurance premiums may increase if you are in an accident, even if you are not at fault.

Standard Auto Insurance vs. Non-Standard Auto Insurance

Drivers who do not qualify for standard auto insurance at a major carrier may be eligible for a non-standard insurance policy. These special policies are aimed at drivers with low credit, poor driving records, or who are otherwise considered too high-risk for a standard auto insurance policy.

Non-standard policies tend to have much higher premiums and deductibles than standard policies. As such, they should only be considered as a last resort for drivers who are otherwise unable to obtain coverage.

Special Considerations

The type of vehicle you own plays a significant role in how expensive your insurance premiums are. Many of the most expensive cars to insure are large or midsize luxury vehicles. Conversely, many of the cheapest vehicles to protect are small to midsize SUVs.

According to Autobody News, the most expensive car to insure in 2022 was the Tesla Model 3, with annual premiums of $2,830. This was followed in second place by the Tesla Model Y, with the Hyundai Sonata in a distant third place.

The cheapest car to insure is the Subaru Forester, at $1,760 per year. The Jeep Cherokee, Honda CRV, and Jeep Wrangler paid similar premiums, all in the $1,760-70 range.

What Are the 3 Types of Car Insurance?

The three types of auto insurance are liability, comprehensive, and collision coverage. Liability insurance covers the obligations of a driver who causes injury to other people or vehicles. Collision coverage protects the driver's vehicle in the event of an accident or other collision. Comprehensive coverage covers repairs to the driver's vehicle, even if they are not the result of damage due to a collision.

What Is a Fair Price for Car Insurance?

Car insurance premiums will vary, depending on the driver's age, driving history, car, and location. In the United States, the average driver pays $1,483 per year as of 2021. This works out to about $124 per month.

What Is the Most Common Car Insurance Coverage?

In the United States, the most common type of car insurance coverage is liability coverage. This is because almost every state requires liability insurance in order to drive a car. Other policies, such as collision, are optional.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. The Zebra. "What Is Standard vs. Non-Standard Insurance?"

  2. Autobody News. "The Most Expensive Cars to Insure in 2022."

  3. The Zebra."Average Cost of Car Insurance in 2021."

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