Science & Technology

Rant

Car insurance is for idiots

Posted 60 months ago|13 comments|1,546 views
Written by
chucklesmcgee
Car insurance is for idiots. And the poor. Much as the smiling Gecko and the cartoon lady superspy mascots would have you believe, car insurance is an absolute ripoff. Unless you are in dire financial straits, buying any more than the absolute minimal insurance required by law is a waste of money.

Any insurance company works by balancing risk (expected payments to you for car damage) with reward (your monthly premiums). So by calculating your risk and cost of an accident from various demographic factors (gender, age, the car you drive, past driving record, location, etc.), insurance companies arrive at the estimated cost of car damage per year, tack on a fat extra commission for themselves and call it your yearly premium. This means that for whatever insurance option you choose, no matter what the deductible, car insurance companies expect to make money off of you. And they do! Auto insurance companies post billions in profits every year out of your pocket. No matter what the great "savings" you get by switching providers might be, most people will lose money.

It's much like playing in a sort of sadistic casino, a strange risk-adverse one. You can either choose to bet (pay a premium) every month to avoid an improbable yet very costly loss (repairs for an accident). The house (an insurance company) much like every other casino, "always wins"- the odds are stacked in their favor for them to take home big profits, you included.

Now, taking such a gamble could make sense, depending on what you have to lose. However, you're expending hundreds, possibly thousands of dollars per year on maintaining a CAR, not your life (health insurance). A car, for most of us, is simply a luxury item. We are entirely capable, though a tad inconvenienced by the absence of a car and can get along driving a dented or damaged vehicle just fine. Only if you have limited funds for a repair, your livelihood or your ability to reach your workplace depends on you having a car and you would have no other way of getting to work in the event of your car being totaled should you consider anything more than the minimum.

The auto insurance industry will play boogie-man with you, giving scary statistics as to the percent of drivers involved in car accidents every year. In reality, most car accidents are minor scrape,bumps and dents which deal only cosmetic damage to a car and do not actually impede it's ability to get you from point A to point B. The probability that you have an expensive accident which actually prevents the car from running is very, very small.

My advice? Ditch all but the minimum liability insurance required by your state. Raise your deductible as high as any company will allow you to. Invest the money you would have spent on insurance premiums. In the long run, you will very likely save and earn a ton of money. If your car gets hit, guess what, pay for the repairs yourself out of what you've saved. If you can't pay for the damage, chances are you can still run your dinged-up car without any intervention at the shop.
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COMMENTS
The Cypress Gang
The Cypress Gang
60 months ago: Do they require a drivers license and proof of residency?
chucklesmcgee
chucklesmcgee
60 months ago: I still recommend following state driving laws requiring minimum insurance- having your license suspended and car impounded is no fun.
The Cypress Gang
The Cypress Gang
60 months ago: What if my state requires insurance by law?
chucklesmcgee
chucklesmcgee
60 months ago: My advice? Ditch all but the minimum liability insurance required by your state.
The Cypress Gang
The Cypress Gang
60 months ago: So? ditch my required insurance. ditch my required registration. ditch my required vehicle inspection. ditch my required dmv drivers license. Just ditch it all.

That kind of logic is why we are where we are. Too many non-legal driver have too many wrecks and can't or won't pay for the damage they have caused...not to mention all of the ghosts that make their way to Mexico after they mame or kill someone. Great thinking on this one. NOT.
chucklesmcgee
chucklesmcgee
60 months ago: I never suggest doing anything illegal. Just stick to the minimum insurance required by law. Cheap, legal and easy.
The Cypress Gang
The Cypress Gang
60 months ago: Oh, yeah, the minimum. Great. No wonder why over 75% of the U.S. is out of touch. Their logic is just carry the/your "Minimum". Too bad if someone else or everyone else has to pick up your slack. Great teaching tool.
Captain Steve
Captain Steve
Hermosa Beach, CA
60 months ago: I agree. . .don't finance your car, then you don't need to carry collision or comp, drive safely, and if something does happen you don't have to deal with a difficult insurance company.
Captain Steve
Captain Steve
Hermosa Beach, CA
60 months ago: I should have added that I've done this for 15 years or more and never had anything go wrong. I'm wayyyyyyy ahead!
60 months ago: TCG, the minimum covers the other guy, not the vehicle you are driving. All Chuckles said was to take out the least you had to, to cover the damage if it was your fault. If it is the other guys fault, your beater car with minimum coverage will be paid for, either to fix or total, even if he has the minimum coverage too.

If it is a major accident, and not your fault, the other guys insurance will cover your injuries, if they don't then your insurance company will and they will sue the other guy, works the other way too.

No where did he suggest not being legal so you were off on a tangent with your comments.

As for 75% of the US being out of touch....

My insurance is out of sight, I still have a male teenager on it, but even without him Geico is sticking it to me and neither my wife nor I have tickets, we do have one vehicle that is financed so required to carry full coverage on it but the other two are beaters and only carry liability with maximum deductable. Got a quote from another carrier, $3000 MORE per year.

I totally agree that insurance companies are sticking it to the American driving public and are making un-earned profits due to nearly all states having compulsory insurance laws. Any time you can get the government to make it a crime to NOT have something that has continuous cost to someone, you can get rich and the public gets the bill.
Altruist
Altruist
Eugene, OR
60 months ago: I agree with sixholdens. Most State laws require a certain amount of liability insurance to cover the other guy. The Insurance industries do indeed play the odds and always come out ahead, very much like the health insurance industry, which is also screwing the public for maximum unearned profits. A high deductible health insurance with a health savings account up to that deductible is cheaper than full coverage. If you have the bucks you can do the same with cars. Put the value of the car into a savings account in case it gets smacked and you won't have to pay the expensive comp and collision.
Or you can do what I did and fix up an old beater. I got two very reliable cars at St. Vinies for less than $500 ea. and they both get 30mpg! When everyone sees all the dents they get out of my way so I don't have to worry about wrecks.
60 months ago: hhhhmmm.
What if you run over someone and hurt them terribly or kill them?
You may lose everything without insurance.
chucklesmcgee
chucklesmcgee
60 months ago: Redstateguy-

I would advise to refrain from running people over as a general matter of policy. If you did run someone over, you would still be carrying minimal liability insurance, which is actually fairly substantial (around $30-$100k in damages, depending on the situation). If you did intend to go running pedestrians over and destroying property on a regular basis, taking out a liability policy well above minimum may leave you ahead fiscally.

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