Is Auto Insurance A Scam?

Consider this – You’ve been paying $200/month for your auto insurance for the last 20 years. You’ve never had an accident. Never had a claim. The insurance company just takes your money every month and you get nothing for it.

I mean, $200/month for 20 years totals $48,000. If you just didn’t pay for the insurance and pocketed the money instead, you would have had enough to buy a brand new car right now (more, if you consider interest).

What a scam, right?


Auto Insurance is not a scam

Before I tell you why auto insurance is not a scam, let me tell you a couple of the main principles about car insurance:

  1. 1.The premium of the many covers the losses of the few. Take any random group of 1000 people and insurance companies will be able to predict how many of them will have an accident or claim in the next year. They cannot, however, tell you which ones, specifically, will have the accidents and claims. They know how much premium they have to collect to cover the accidents and claims of the few people that will have them. Some of those claims will be big. For example, injury claims could have tens of thousands of dollars worth of payouts.
  2. 2. When you have a car insurance claim, the purpose of insurance is to put you back into the position you were in before the claim (minus the deductible). You cannot profit from insurance claims.

You’re Paying For An Unknown Future Event

Now that you understand the main principles of car insurance, you know that when you pay for your auto insurance policy, you’re paying for an event that may or may not happen to you in the future. Thousands of other people are doing the same thing. Only a small percentage of you will have to use the insurance to make a claim. This is by design and it’s the whole point of insurance.

It’s unlikely that you’ll ever have a huge accident in the future, one that, say, totals your car and causes injuries to others. But if you do, you’ll be glad that you have insurance. Otherwise, you’ll be paying for that accident for the rest of your life. Your auto insurance will put you back into the financial position you were in before the accident so that the accident will not financially ruin you. Insurance gives you peace of mind to know that one accident won’t ruin you, financially. That’s not a scam.

Of course, shopping around to try to get the best rates is always a good thing to do. Call us. We’d love to quote you. Our phone number is at the top of this page.

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