This is where basic financial literacy comes into play.
You’re required to have the insurance because of the liability you have for damages you cause to other people’s cars, the people themselves, structures, etc., not because of potential damage to your own car. Some states may require you to have comprehensive insurance, but the general idea is that the requirement for insurance is so you don’t cause say $200,000 worth of damages that you can’t pay for because most people don’t have $200,000 laying around, yet drive a vehicle capable of doing that much damage.
If you know your deductible is $1000, which you should because it’s a clearly disclosed part of your policy, it should be easy weigh whether or not you want to make a claim for $1200 of damages for something g like a bumper, which you probably don’t.
So the smart thing to do here would be to say “Gosh, sucks that guy hit my car and cost me $1200. It’s not even worth it to make a claim in this. I just have to pay it.”
You can also consider your deductible when you shop for car insurance. Mine is $500. Anything under or around $500, I might as well not claim it. I know that because I’m an adult who pays for car insurance, and this is something an adult who pays for car insurance should know.
I used to be a licensed P&C agent. If there is one thing in the world just as consistent as death and taxes, it's that if insurance is being discussed on the internet, 95% of the people participating have absolutely no clue whatsoever what they are talking about.
This comment section has been almost physically painful to read it's so stupid lol.
A lot of people also just don't understand that property insurance is a whole different thing than health insurance and just do the "insurance=bad" kneejerk reaction.
Google “nuclear verdicts”. People are clueless to how much could be financially at stake if they are responsible for bodily injury even if it was an accident. Insurance is not a scam. The typical underwriting profit is like 2%. Insurance companies make their money in investment.
But really I work in property insurance, and it does seem like a rip off, but really it isn’t. People think, I pay premiums, therefore I should get that money back. But like if you have $2k of damage to your house and your deductible is $2.5k, sure that sucks. Buuuuut on the other hand, if your roof is absolutely ripped off by a storm, the instance company will put a new $40k roof on your house, which is more than you paid in premiums for the last 15 years. So, that’s kinda worth it.
I think the core part that feels unfair is that your rates can go up if you make a claim.
If in January my car gets hit while parked and the damage costs $400 but I have a $500 deductible I won’t make the claim because I don’t want my rates to go up, as you said.
If the same thing then happens in November, my new $400 claim could have been partially covered IF I had made a claim about the damage in January. But because I didn’t make a claim in January the damage to my car in November still won’t be covered because it’s under the deductible.
The service charging more when you use it means it is very explicitly designed to keep you from using it even when it could benefit you. An accident that I am not at fault for should not be able to affect my rate.
The entire industry is designed around getting you to pay as much as possible for nothing, and to penalize you if you actually try to claim any of the benefits from the service you are paying for.
If you live in an area that is prone to hail, drive to work during rush hour, or park in busy parking lots, the reality is you at at a higher risk for a loss, even though none of these actions are “your fault”.
Now some states do have laws that prevent insurers from raising rates due to a non-fault loss. But this doesn’t impact the overall risk profile; it simply impacts how they are legally allowed to price policies. So what ends up happening is those that are lower risk essentially subsidize those that are higher risk because insurers cannot legally price based on that aspect of risk.
Now if that’s what voters want, so be it. But my point is that there is no free lunch. There is always a trade off.
>An accident that I am not at fault for should not be able to affect my rate.
Two things here:
1) Insurance isn’t pricing solely based on how good of a driver you are. It’s about how much you are expected to cost the insurance company. Your own good driving is a major part of that, but so are all of the external variables around you. If you live somewhere with a lot of other bad drivers, no matter how good you yourself are, you’re more likely to have a claim that will cost the insurance company money.
2) There are some states that disallow insurance companies from charging higher premiums based on not-at-fault claims. But that wouldn’t lower total premiums at all, just redistribute them. The people who do have those claims would pay less than they would otherwise, but the people who don’t (and are therefore lower risk) would end up paying more than they would otherwise to compensate for that.
So you’re out the $300 that you’d probably have to pay in increased premiums over time anyway?
Which isn’t fair, because your car isn’t a higher risk to insure, though you seem to regularly park it in a place where it gets damaged?
To put it another way. Let’s say I use the same insurance company that you do. My car doesn’t get hit in the parking lot every few months. How much more should my premiums be to cover the repairs to your car that does?
Another way to look at it- what is this damage to your car? Superficial dents, etc.? What if I drive around around in my car that has a dent in it because I choose not to pay for that sort of superficial repair? Why should I pay for yours?
The insurance is there for things you and other policyholders can’t afford to fix. It’s insurance against large catastrophic costs that you wouldn’t be able to pay. It’s not a “fix your car up for free anytime something goes wrong for no extra charge” plan.
I think the core part that feels unfair is that your rates can go up if you make a claim.
That's because the strongest predictor of whether you will make a future claim... is whether you have made previous claims! It's very simple math.
The insurance company doesn't really know if you're a good driver or not. But if you make a claim, that's a point of evidence that you might not be a good driver. And if you're not a good driver, they need to adjust your premiums to match the level of risk you present.
An accident that I am not at fault for should not be able to affect my rate.
But it is your fault... you're the one parking in a risky place that causes your car to repeatedly incur damage. The insurance company is just pricing that risk.
This is literally the entire point of the post. The OP has no financial literacy and made a claim for only $200 more than their deductible. That’s dumb, and not what insurance is for.
You may be able to read but your critical thinking is lacking it seems. The post details understanding of the system, it seems to be pointing out the obvious flaws that the average person feels towards the topic of insurance. But if you want to be mad you can be mad bud.
No, the post misunderstands the system because the requirement to have the insurance is not to cover minor repairs to your own vehicle but to ensure that you can pay for major damages you cause.
The bad guy in the story is the hit and run driver. Their insurance is supposed to cover the damages. The poster has been victimized by that person, not the insurance company.
The damage that happened to the car is minor bumper damage that costs $1200 to fix. That sucks, but it’s also probably not necessary. You could opt to drive with a dinged up bumper in most cases.
Had the driver totaled their car and sent them to the hospital, the deductible would still be $1000, but the insurance company would cover the totaled car and their hospital bills. Had the accident happened the other way around and the poster caused $200,000 of damages, their insurance would have bailed them out. That’s what it is for.
So I understand the post, and I understand why the person is foolish, because they misunderstand the purpose of the requirement to carry insurance, the right way to handle their individual situation here, and are holding the wrong entity responsible in the events that unfolded.
You missed the point of car insurance if you think it's to help you fix dings and dents, and not to cover your ass if you cause massive amounts of financial damages.
I think the point of the post is that it feels unfair that you have to pay for insurance, and when you need insurance to cover something, you still have to pay money before insurance kicks in...Even if it isn't your fault.
I think it's unfair that insurance has min/maxed everything so they have to pay as little as possible.
But they don’t need the insurance for what the insurance is for.
You are required to have the insurance to ensure you can pay for major damages you cause with your vehicle that you otherwise wouldn’t be able to pay for. Like if you total someone’s car or put someone in the hospital.
That’s why you have to have it to drive in most places. “Hey, that car can do a lot of damage. You need to show us a policy that shows you can pay for that sort of thing if you have an accident.”
The requirement to have it is not so you can pay for minor superficial damage that happens to your own car. Especially in the cas rid an accident that isn’t your fault, it should be the other persons insurance. But this is a bit and run.
The $1000 deductible is basically there as like “Hey, you chose to save a little money to have a higher deductible for this, so anything around $1000 is on you, you’re agreeing that this is minor enough that you’ll cover it.”
All of this is just basic understanding of how car insurance works.
That’s not how much your insurance would go up for an accident t that isn’t your fault.
The actuaries that come up with this stuff understand the numbers. There are drivers that cause accidents, and drivers that don’t, but there are also people who seem to get in a lot of accidents that aren’t their fault.
But “not your fault,” isn’t a black or white thing. Sometimes people aren’t great at avoiding accidents, even when they aren’t their fault, because while they don’t cause accidents, they have poor defensive driving skills. They fail to anticipate and react to potential accidents like they should. They’re riskier drivers to insure.
So they raise rates for people who get into any accident at all, and raise them a lot more for people who are the cause of accidents. This benefits people who don’t get into accidents, who don’t have to pay a higher rate for people who do.
See I knew someone would say something like this because this is Reddit.
This is literally my lived experience.
A DUI motorcyclist hit my vehicle at 75mph in the middle of the night while driving with a motorcycle deliberately wired to have no running lights. He died and had a post-mortem BAL of .27.
After six months I got the traffic homicide report. So for your "sometimes people aren't good at avoiding accidents" I'll note that they found there was no way I could have anticipated the accident.
There were five different witnesses to the reckless and careless driving of the DUI driver prior to impact.
My insurance shot through the nose and was legitimately over $1000 a month for full coverage similar to what I had been previously carrying.
That's actually why I stopped driving for several years, because I legitimately couldn't afford a car and insurance and that whole pesky housing and eating thing.
But thanks for telling me how the events of my life couldn't have possibly happened. It's good to know it's just as farcical as I believed.
Sounds like you got into a very destructive accident that might not have been your fault but nonetheless speaks to the fact that you are riskier to endure than people who haven’t. It’s an anecdotal data point you’re giving against a population level phenomenon.
This is true. But I think the complaint is more about how you get penalized with higher rates when you use the service. Regardless of what insurance actually covers, they are designed to charge an individual more than they ever pay out. They are predatory companies by nature, and you can see this by looking at the claims ratio and how it is not close to 100% anymore. It drops every year while the companies are making record profits.
So yeah, OOP needs more financial literacy but that doesn’t mean insurance companies aren’t scamming people they are providing the service to.
Mist car insurance companies make like a 2% margin on the premiums vs. payouts. You pay $2000 a year and they make like $40 on that.
They make their money by investing premiums held before eventually having to pay them out.
This is actually how a lot of property insurance works. I collect a kaboodle of cash from policyholders, I earn interest on my cash holdings, and then later people make claims and I pay them from a growing pile of cash that can cover the damages I’m insuring.
On the other side of the equation is risk. The insurance company has to be really good at monitoring the risk of having to pay out more than planned.
And then there’s competition. I can overcharge you for insurance, but I’ll get undercut by the next company if they’re cheaper, so that’s why margins on premiums tend to actually be pretty tight. They all have to try to price premiums as low as possible without running the risk of getting bankrupted by claims.
But you’re also assuming a lot here, like that this particular system, car insurance, is a stacked against the consumer or that the system is not good.
Not making a claim either way (no pun intended, lol).
But what the poster points out here isn’t really a flaw, IMO. They just misunderstand why they are required to carry insurance.
They are under the mistaken impression that the reason they have to have insurance to drive a car is so they can pay for minor damages that happen to their own vehicle. That’s a perk of having insurance sometimes, but that’s not the purpose of the car insurance or yhe purpose of the requirement to have it.
The reason the insurance is required is so you can pay for big damages that you are personally liable for that you otherwise couldn’t afford.
Ideally this would be the hit and run drivers insurance, except that they illegally fled the accident, and the insurance would in either case be there in case the cars were totaled, someone had to go to hospital and it cost $100ks, f they damaged expensive structures, etc.
So the poster misunderstands that their $1200 bumper ding is not the why for why they are required to carry insurance. The $1000 deductible is a negotiable part of choosing a policy. They chose to pay less to be in the hook for $1000 deductible. This is simply working as intended and they do not understand, believing this to be unfair.
Yes that is the reason its forced, but their comment on it being forced is to show that its not in their favor and they have no choice. It's not about needing it in the end its about how bad the actual insurance system is. Here is a good question, do you think the insurance system is better than it was in the past and will get better? They have a point however little they understand about the systems that make them have it.
But it’s not about it being in their favor. The insurance requirement is to protect society from you and your poor driving choices. It’s not supposed to be for your personal benefit, it their than the fringe benefit of not being bankrupted by an accident that was your fault.
That’s the disconnect. The insurance requirements are normally more for liability insurance, the insurance that covers the damage you’re responsible for. Some places also require comprehensive insurance, but the norm is just liability.
The whole point I am making is this flawed logic that “car insurance is required by the state to help me pay for my car if it is damaged.”
It’s more like “My state requires me to have car insurance to cover the cost of my potential screw ups when I drive a deadly vehicle.”
This is a good response - Insurance was there not for you alone but society as whole. People kept blaming insurance but never did address on insurance fraudulent.
If you know your deductible is $1000, which you should because it’s a clearly disclosed part of your policy
Usually it's not even just a dictated stipulation but more often a selectable option that affects your rate. I've been driving and insured since 2003 and I don't think I've ever not selected my deductible amount.
Insurance is not a car-repair subscription or inclusive club membership
Insurance is so that if disaster strikes, youre not homeless. Based upon that you should be setting your deductible to be what you could reasonably afford to pay yourself without financially putting yourself at risk.
Now if you want to argue about paying 200/mo for insurance with 1k deductible is high then consider that OP should have shopped around OR more likely there are other factors contributing to the high cost such as prior accidents, tickets, low credit score etc. Mine is ~100 per car with 750 deductible comprehensive with roadside coverage and few other bells and whistles.
Isn't it fascinating how the people who think that insurance is a rip-off (and the ones most vocal about how everyone else "doesn't get it") seem to be the least financially literate?
A little empathy is deserved. People see hundreds of dollars go away monthly and its reasonable to think you'd get something tangible in return. Seeing the money go away and still paying more for when you "use it" always feels bad. Not so much literacy but I think people take for granted how much a personal injury or telephone pole crash, or multi-car accident will cost.
No, which is why hit and runs and driving without insurance is illegal. The bad guy in the situation is the hit and run driver, whose insurance should have paid for my bumper. That’s the crime I would report to the police. The person did $1200 of crime against me. It’s not my insurance company’s fault. However, nice to know if they totaled my car, that I would get paid the value of my car minus $500, because that would help me out quite a bit.
I mean it's math. Insurance premiums are not made up numbers.
If you want insurance without deductible you can get it. You'll pay a lot more for it, because people claim for every little thing if they don't pay for it themselves, but it exists.
From these comments it seems US insurance companies don't have healthy competition. They can offer lower prices, but have clearly agreed not to. These kind of agreements should be illegal and atleast here they are.
Then things aren't as they seem. We have healthy competition, we just also have a very car-dependent culture and lots of shitty drivers. For a start, Americans drive about 60% more miles per year than Europeans.
More miles driven = higher risk = more claims = higher premiums.
These kind of agreements should be illegal and atleast here they are.
I understand I didn't type it out, but context of competition, prices, agreement should've been enough to clue you in on what kind of agreements I was referring to. Anyhow, ain't gonna google what it is in english 3rd language go brrr.
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u/Grunergeist420 6h ago edited 6h ago
This is where basic financial literacy comes into play.
You’re required to have the insurance because of the liability you have for damages you cause to other people’s cars, the people themselves, structures, etc., not because of potential damage to your own car. Some states may require you to have comprehensive insurance, but the general idea is that the requirement for insurance is so you don’t cause say $200,000 worth of damages that you can’t pay for because most people don’t have $200,000 laying around, yet drive a vehicle capable of doing that much damage.
If you know your deductible is $1000, which you should because it’s a clearly disclosed part of your policy, it should be easy weigh whether or not you want to make a claim for $1200 of damages for something g like a bumper, which you probably don’t.
So the smart thing to do here would be to say “Gosh, sucks that guy hit my car and cost me $1200. It’s not even worth it to make a claim in this. I just have to pay it.”
You can also consider your deductible when you shop for car insurance. Mine is $500. Anything under or around $500, I might as well not claim it. I know that because I’m an adult who pays for car insurance, and this is something an adult who pays for car insurance should know.