How do claims reflect on car insurance premiums

How do claims reflect on car insurance premiums?

Most people do not understand insurance companies. Which is why they are surprised with how things work with auto insurance companies and why car insurance companies do what they do. The reason is that the concept of insuring risk is a complicated idea not everyone grasps. When you go to the Mall and buy an ipod, a bed or a car, you pay the price get the product or the service, depending on what you bought and go home. What would happen if you had to buy another one because you lost your first one. What would you think if you were asked to pay more for the same product on the same day. You might not be very happy, you might be really mad. Fortunately that does not happen with ipods, cars and footballs but it does happen with insurance policies.

How is that the case? If you buy an auto insurance policy today and have an accident that is your fault and costs the insurance company a big settlement, next time you try to renew the policy the company will either not agree to renew the policy or charge you extra. You might be lucky and nothing changes, but that is highly unlikely. The most likely outcome is a large increase in your auto insurance premium. That will very likely make you mad, unfortunately that will not help you with your insurance. Understanding the standpoint of the insurance company will be much more helpful.

Why do auto insurance companies do this? First of all it is useful to understand how insurances companies calculate your premium in the first place. They calculate how much of a risk you pose to their company. If you don’t have a bad driving record, your credit score is fine, you live in a safe neighborhood and you are not a young driver it is likely you got a good price for your insurance. But if you had a bad accident that cost the insurance company a fortune they have to reassess your risk to their auto insurance company. If you have claimed large sums from you insurance dealer expect a significant rise in your premium. I remember when I had fully comprehensive insurance on my first car. I claimed for every scratch and bump I received. I lived in Spain, so I got a lot of scratches and bumps from drivers that did not leave a not. When I tried to renew my auto insurance it had increased in price by over double. I was also added to a black list and most insurance companies would offer the same premium price.

It is even worse if you did not carry enough insurance when you had an accident. Countries and states require by law certain levels of auto insurance coverage. If you do not meet those minimums you might have to pay a fine or even face criminal charges.

It is worth having good car insurance. It is even more worthwhile driving safely and carefully both for physical and financial health.