Types of Auto Insurance Companies
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UPDATED: Mar 13, 2020
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You wouldn’t go to the burger joint down the street to get an expensive steak, and you wouldn’t go to the most expensive steakhouse in town with five bucks to your name expecting to receive a high quality meal.
The same goes for insurance companies. Just like any other type of business, there is a broad spectrum of choices available to you.
Some are the “burger joint down the street,” and some are the “fanciest steakhouse in town.”
Knowing the differences between these types of companies will save you a great deal of money, time, and stress.
Similar to the example provided, both companies will take your money and give you something in return.
But if you know what you want beforehand, how much money you are willing to spend and what to expect in return, you’ll be on the right track.
The following is a basic explanation of the types of coverage offered by insurance companies, including their risk appetites and specialties.
It’s worth noting that there may be overlapping characteristics across different categories.
Ultra Preferred/Preferred Market or Carrier
These companies specialize in insuring the most favorable risks (people) in the market. An ultra preferred client would most closely fit the following description:
You require and can afford the highest coverage limits available, including physical damage coverage.
This means you have a lot to insure, maybe more than just one car and a house.
Typically, you have a one year policy and never miss a payment (lapse in coverage).
Additionally, you have a clean driving record and you’re not prone to receiving tickets or getting into accidents, regardless of fault. In their eyes, you are a lower-than-average loss exposure.
Ultra preferred insurance companies tend to have more broad policy language, meaning they cover more types of insurance claims in more circumstances.
Examples of this type of insurance company include State Farm, Farmers, Nationwide and USAA.
Standard/Middle Market or Carrier
These are insurance companies that regularly insure the middle of the road risks (excuse the pun). You belong with a standard carrier if you fit the following description:
You desire and can afford insurance limits that are higher than the state minimums, but may not necessarily need the highest liability limits available.
You may or may not include physical damage coverage on your policy. Perhaps you have only one or two cars and rent an apartment or home you are not responsible for insuring.
You may purchase an annual or semi-annual insurance policy, and rarely if ever, miss a payment and let your coverage lapse.
It’s possible you had an accident and/or a couple of tickets within the last few years (insurance companies usually check within a three year window). In the insurance company’s eyes, you are an average or better-than-average loss exposure.
Similar to ultra preferred carriers, standard market insurers have relatively broad policy language, meaning they aren’t skimpy on coverage.
Standard Carriers include companies such as The Hartford, Travelers Insurance, Safeco and Mercury Insurance.
Non Standard/Specialty Market or Carrier
This is basically your “high risk auto insurance” coverage.
These companies specialize in insuring the high risk drivers. You may only want the minimum car insurance limits required by the state you reside in, while spending as little money as possible on your insurance.
You’re probably are not looking for physical damage coverage on your policy and you aren’t responsible for insuring anything other than the vehicle you own.
Non Standard clients most often choose to purchase insurance on a month-to-month basis or via a semi-annual policy, and often let the coverage expire, whereby requiring reinstatement.
If you have multiple tickets and accidents, this is most likely the type of insurer you will obtain a policy from.
Simply put, you are a higher-than-average risk for the company insuring you. The odds of you filing a claim for monetary damages are higher than that of the groups above.
When it comes to Non Standard or Specialty insurance companies, you get what you pay for.
There are some insurers in this group who pay claims and offer customer service matched with the companies in the categories listed above.
At the same time, there are some who offer bare bones service, leaving you out in the cold when it comes to claims and customer service.
Be sure to evaluate the policy language for these insurers as it can go either way. Some have broad language and some are very restrictive.
It may be beneficial to consult an insurance agent if you aren’t sure.
Some examples of non standard or specialty carriers are Bristol West, Aggressive Insurance, Gainsco and US Auto.