Glossary

Residual market

State-created arrangements that guarantee car insurance to drivers no insurer will cover voluntarily, such as assigned risk plans.

Also called: shared market, insurer of last resort, involuntary market

The residual market is the safety net for drivers who cannot buy car insurance in the regular, or voluntary, market, often because of serious violations, many accidents or a history of cancellations. The NAIC describes it as a method for covering higher-than-average risks who cannot get insurance through normal channels. Because states require insurance to drive legally, they make sure some coverage is always available.

States use three main structures. Most run an assigned risk plan, which assigns applicants to insurers in proportion to each company's share of the state's market. A few use a joint underwriting association, in which a small number of servicing insurers write the policies and losses are shared across the market. North Carolina uses a reinsurance facility: insurers accept drivers but can cede high-risk policies to the North Carolina Reinsurance Facility, which spreads the losses among all auto insurers in the state. AIPSO, an industry organization, administers many state plans.

Residual market coverage usually costs more than standard insurance and often offers fewer options, sometimes little beyond basic liability. Treat it as a last resort: try nonstandard auto insurance carriers first, and move back to the voluntary market as your record improves. See assigned risk plans: insurance of last resort.

Last reviewed October 4, 2026

In the index now

Related terms

Assigned risk plan A state program that guarantees basic liability coverage to drivers no insurer will voluntarily cover, by assigning them to insurers in the state. Nonstandard auto insurance Coverage sold to drivers that standard insurers decline or price steeply, such as those with DUIs, many tickets, lapses or little license history. High-risk driver A driver insurers expect to cost more in claims because of a DUI, tickets, crashes, a coverage lapse, little experience or similar factors. Reinsurance Coverage that insurance companies buy to pass part of their risk to another company, helping them pay large or clustered losses. Financial responsibility law A state law requiring drivers to show they can pay for injuries or damage they cause, almost always by carrying minimum liability insurance.

Related guides

Assigned risk plans: insurance of last resort How state assigned risk plans and other residual market programs insure drivers no company will take, who qualifies, what it costs and how to apply. High-risk car insurance: options when insurers say no What makes a driver high risk, the three places to find coverage after a refusal (standard, nonstandard, the state plan), and how to get back to normal rates. State low-cost auto insurance programs Which states run low-cost car insurance programs, who qualifies for California's CLCA and New Jersey's dollar-a-day SAIP, and what to do if your state has none. What NAIC auto insurance data measures A plain-English guide to the NAIC Auto Insurance Database Report, the main official source on auto insurance spending by state: what it measures and its limits.