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Why do I need to have auto insurance? Most of us know the answer to this question, but still do not like the fact that we are required to pay hundreds, sometimes thousands of dollars, every year in auto insurance premiums that we may never even benefit from. Some of us also wonder why our rates continue to fluctuate, even when we have a great driving record and have not incurred any tickets or accidents in years.
Understanding the concept of auto insurance premiums is very important for each one of us. It helps us to not only accept the fact that we need to carry an auto insurance policy but to actually appreciate the coverage that we carry on our autos.
Ultimately, insurance policies are a way for a community to gather together and help each other with losses that any one person, or group of persons may incur.
Insurance actuaries consult statistics, and calculate how many accidents occur in a given region, age group and other relevant factors. These factors play into how much a person pays for their auto insurance premiums.
If you live in a large city with a lot of traffic, you are more likely to be involved in an accident, than if you lived in a small town, where there are not many drivers on the road at any given time.
Young drivers, or a person with little driving experience, are considered a higher risk than someone who has been driving for many years. Teenagers are considered to be the highest risk drivers on the road. Not only do they have little experience driving, but they are also more likely to have multiple friends as passengers in their vehicles, thus getting distracted more easily. Car accidents are the leading cause of death for teenagers in the United States.
Another factor that plays into what your auto insurance premiums may be is your sex. Though this is a much debated argument between the sexes, it is true that while women may be involved in more auto accidents men tend to cause more monetary damage when getting into an auto accident than women.
All of the above items play into what your own personal auto insurance premiums may be. We also need to remember, that even though it may not always seem fair, our rates are also calculated on other peoples losses, not just our own. The more accidents that occur in a particular region and the more money an insurance company pays out in a given time period, the more likely it is that ALL people in that area will experience an increase in insurance rates.
Paying your auto insurance premiums can be likened to each person within a community tossing money into a big pot which can later be used to help out their friends and neighbors in the event they experience a loss that they are not capable of paying for themselves. The more accidents that occur the more money each one of us must contribute. The higher the risk you present the more money you are required to contribute.
