Auto Insurance Facts and info for dummies.
We are all dummies when it comes to things we don’t understand, there is no shame in that. Auto insurance is one of those subjects that most of us have far from a sure footing. This is because the concepts and even the mathematics behind auto insurance are far from common day. If you are feeling a little humbled by the “dummy” in our title you might want to try this little example. It is an illustration of how statistics can be counter intuitive and as statistics are an integral part of insurance, especially car insurance it is a good illustration of the complications in understanding the main facts in auto insurance.
Picture a game show where you are asked to choose a door out of three. One leads to a million dollar price the other two to a bucket full of pain falling on your head. Imagine that one of the doors is opened (one you didn’t choose) and it is proven to be one of the bad ones. You still have two doors to open, one of them you chose, one of them is the correct one. Now the game host asks you if you want to choose doors again. If you would like to change your previous choice. Would it affect your chances to win if you changed doors at this time. The surprising answer is yes. Statistics explains why. When you made your first choice you had three doors to choose from and one chance to be right. That gives you a 33.33% of getting it right. Once a door is opened and you have another chance to choose, your chances have increased to 1 in 2 or 50% chances.
This puzzle shows that understanding statistics and problems based on statistics is not always straightforward. What facts should you understand in order not to be a car insurance dummy.
1) Don’t double up insurance coverage.
There is no need to have insurance twice on the same kind of coverage. Sometimes our credit cards, umbrella insurance and employers provide us with insurance. If that is the case make sure your regular car insurance is not a waste of money. If it is not the only insurance cover take it off your car insurance policy.
2) Use deductibles to save money.
Deductibles are a guarantee from the customer to the insurer that the customer will pay for a predetermined amount of each claim. For instance if you contract a $500 deductible you will be required to pay the first $500 of every claim. This shares the risk of a claim with the insurance company reducing the cost of the premium.
3) Make yourself a low risk customer.
Auto and car insurance companies determine the price of an individual’s premium in relationship with the chances of them being involved in a claim. The chances for that to happen are calculated with a statistical study of tremendous amounts of data.
There is no shame in not understanding car insurance, only in not trying. Make the effort to understand the main principles of car insurance and prepare to save money.