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What is the Difference Between Standard and Nonstandard Insurance?

on March 31, 2012

My agency specializes in nonstandard car insurance and one question I get asked all the time is what’s the difference between the insurance I sell and the “other guys” – you know, the guys who advertise on TV and are more well known.

Most people assume it has to do with the financial health of the carrier, or their quality of service to their customers.  But, the truth is that it doesn’t have anything to do with any of that.

The only difference between standard and nonstandard insurance is the policy forms they are written on, and the range of applicants that can be accepted.

Standard policies are written on “standard” policy forms that are approved by the state – in my case, in Arizona.  These “standard” policy forms are cookie cutter policies that are very similar from company to company in terms of what they cover and what they cost.  Another thing they share is that most standard policies have very narrow underwriting guidelines – so they are geared to the client with good credit and a good insurance history.  They limit exposure for risk for the insurance companies by excluding those with poor credit or a poor driving record.  All of the standard carriers love these because of this reason.  Hence, why they are called “standard” carriers.

Nonstandard policies are also written on state-approved forms, but they vary widely in pricing because they are custom policies designed by the insurance company who issues them to accept a broader range of risks.  Also, many nonstandard carriers don’t take your credit rating into account, although some do what is called “insurance scoring” – which is different from credit scoring in that it’s only looking at your stability at your address, your track record in paying you car insurance, and things like that.

Nonstandard can be less expensive or it can be more expensive than standard policies – it all depends upon the risks presented and the appetite for the carrier for that type of risk (most nonstandard insurers specialize in risks that are unique to their company).  So, it’s important for your agent to know which nonstandard carrier will accept the risks you’ve got (if any).

So, as I’ve said, “standard” or “nonstandard” has nothing to do with the financial health or A.M. Best rating of the insurance company – or the quality of the coverage provided.  I’ve heard people refer to nonstandard insurance as “substandard” insurance.  But, this term is very erroneous as no state would ever permit a substandard insurance policy to be sold.  So, nonstandard insurance should not be considered substandard in any way as it offers essentially the same coverages as standard insurance does – but for a broader class of people who may not be accepted otherwise.

If you have any questions regarding car insurance, please feel free to call us anytime.

Go Time Insurance, (602) 938-1515


One response to “What is the Difference Between Standard and Nonstandard Insurance?

  1. […] insurance because their credit rating has taken a hit.  Go Time Insurance specializes in offering nonstandard insurance (click the link to read our article explaining the difference).  Most of the carriers we use […]

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