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An automobile insurance plan is a state-run safety net for drivers who cannot buy car insurance on the regular market. Most states require drivers to carry liability coverage. However, some drivers get turned down by every insurer they ask.
For example, a driver with a DUI, several at-fault crashes, or a long gap in coverage may hear “no” again and again. An automobile insurance plan makes sure these drivers can still get legal coverage. It is often called an “assigned risk plan” or the “residual market.” Knowing how it works can help you get back on the road, and later move back to standard coverage at a lower price.
How an Automobile Insurance Plan Works
Every state has some kind of residual market for auto insurance. In most states, this takes the form of an automobile insurance plan. Insurers that sell auto coverage in the state must take part. Each one accepts a share of high-risk drivers based on its market share. For example, a company that writes 10% of a state’s auto policies would typically be assigned about 10% of the plan’s drivers.
Most of these plans are run by AIPSO, the Automobile Insurance Plans Service Office. AIPSO is a nonprofit that handles assignments and rules for many states. You can learn more at AIPSO’s official website. In most cases, you apply through a licensed agent who is certified to submit plan applications. The plan then assigns your policy to a participating insurer. That company issues your policy, collects your premium, and handles your claims like any other customer.
The residual market is small. In most states, it covers well under 1% of insured vehicles. This is because the regular market now offers non-standard coverage to many high-risk drivers. As a result, the automobile insurance plan is truly a last resort, not a first stop.
Types of Residual Market Programs by State
Not every state uses the same model. The classic automobile insurance plan uses assignments. However, a few states use other structures. The NAIC auto insurance consumer guide notes that every state regulates its own market. Here are the main types you will see:
| Program Type | How It Works | Example States |
|---|---|---|
| Assigned risk plan | Drivers are assigned to insurers based on market share | New York (NYAIP), Texas (TAIPA), California (CAARP) |
| Joint underwriting association | A group of insurers shares losses; servicing carriers handle policies | Florida (FAJUA), Missouri, Hawaii |
| Reinsurance facility | Insurers must write every driver but can cede high risks to a shared pool | North Carolina |
| State fund | A state-created insurer writes policies directly | Maryland (Maryland Auto Insurance) |
| Placement facility | A facility places drivers with participating insurers | Michigan (MAIPF), Massachusetts (MAIP) |
Each automobile insurance plan sets its own rules. For example, some states require proof that you were refused coverage. Others require that you have a valid license and no unpaid premiums from past policies. In most cases, you cannot use the plan if a standard insurer has offered you a policy recently.
California’s plan is also unique. It runs the California Low Cost Auto Insurance Program for income-eligible drivers. That program offers lower liability limits at reduced prices. As a result, it serves a different group than the typical high-risk driver.
What an Automobile Insurance Plan Costs and Covers
Coverage through an automobile insurance plan is usually basic. Most plans offer your state’s minimum liability limits. For example, a state might require $25,000 per person and $50,000 per accident for bodily injury. Many plans also offer higher limits, medical payments, or uninsured motorist coverage. However, options vary widely. Some plans offer collision and comprehensive. Others offer only limited physical damage coverage, or none at all.
Price is the biggest drawback. Plan rates are typically higher than standard market rates. Regulators often design them that way on purpose. Higher rates prevent the plan from undercutting private insurers. They also reflect the higher claim risk of plan drivers. In most cases, drivers in the residual market can pay twice as much as a clean-record driver, or more.
For context, the Insurance Information Institute reports that the average U.S. auto premium is well over $1,000 per year. You can review current data at the Insurance Information Institute’s auto insurance facts page. A high-risk driver in a plan may pay several thousand dollars annually. Payment terms can also be stricter. For example, some plans require a sizable down payment before coverage begins.
Here is how common factors affect the cost of an automobile insurance plan policy:
- Driving record: DUIs, reckless driving, and at-fault crashes raise rates the most.
- Coverage gaps: Going uninsured for months typically adds a surcharge.
- Location: Urban ZIP codes usually cost more than rural ones.
- Vehicle: Expensive or high-performance cars cost more to insure.
- SR-22 filing: Many states require this proof of insurance after serious violations.
How to Apply and When to Leave the Plan
Start by shopping the regular market first. Many non-standard insurers accept drivers with tickets, crashes, or even a DUI. As a result, you may find a better price outside the automobile insurance plan. Get quotes from at least three to five companies. Ask an independent agent to check non-standard carriers too.
If every insurer turns you down, follow these steps:
- Find a certified agent. Your state’s plan website or insurance department can list producers who handle plan applications.
- Gather documents. You will typically need your license, vehicle registration, VIN, and driving history.
- Complete the application. Answer every question honestly. Misstatements can void your policy.
- Pay the deposit. Coverage usually starts once the plan receives your application and payment.
- Request an SR-22 if needed. Your assigned insurer can file it with your state DMV.
Your assignment usually lasts a set period. In many states, the assigned insurer keeps you for up to three years. However, the plan is not meant to be permanent. Most violations drop off your record after three to five years. Once that happens, shop the regular market again.
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You can speed up your exit in several ways. For example, keep continuous coverage with no lapses. Pay every premium on time. Take a state-approved defensive driving course, which can remove points in some states. Avoid new tickets and claims. In most cases, a clean three-year record makes you eligible for standard coverage again. As a result, you could cut your premium by hundreds or even thousands of dollars per year.
Finally, check with your state insurance department if you have trouble. Every state has a consumer help line. Staff can explain how the local automobile insurance plan works and how to file complaints.
Frequently Asked Questions
Is an automobile insurance plan the same as assigned risk insurance?
Yes, in most states the terms mean the same thing. An automobile insurance plan assigns high-risk drivers to insurers based on market share. However, a few states use joint underwriting associations or reinsurance facilities instead.
Who qualifies for an automobile insurance plan?
Typically, any licensed driver who cannot find coverage on the regular market qualifies. Some states require proof of rejection from insurers. In most cases, you also cannot owe unpaid premiums to a prior plan insurer.
Is assigned risk insurance more expensive than regular car insurance?
Yes, plan rates are usually higher than standard rates. For example, high-risk drivers may pay double the average premium or more. As a result, it pays to shop non-standard insurers before applying.
How long do I have to stay in the plan?
There is no lifetime requirement. Many assignments last up to three years. However, you can leave any time a regular insurer offers you a policy, which often happens after your record improves.
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Official Sources & Resources
For verified information on auto insurance regulations and consumer protection:
- NAIC (National Association of Insurance Commissioners): naic.org
- Insurance Information Institute: iii.org
- Federal Trade Commission — Auto Insurance: consumer.ftc.gov
- USA.gov — Car Insurance: usa.gov/car-insurance
Content last reviewed October 2026. If you notice any outdated information, please contact us.