Principle Should be Applied to Auto Insurance

Principle Should be Applied to Auto Insurance - Car insurance comes in two forms: traditional insurance you buy from your agent or directly from insurance companies, and insurance purchased from car manufacturers and dealers. Both are risk transfer and sharing device and I will generally refer to both as insurance. Because auto third party liability insurance has no equivalent in health insurance, a traditional auto insurance, I will examine only collision and comprehensive insurance - insurance covering the vehicle - and not a third-party liability insurance.

Bumper to bumper

Here are some commonly accepted principles of auto insurance:

* Void Poor maintenance of certain insurance. If the car owner never changed the oil, power train warranty is automatically void. In fact, not only oil to be changed, changes must be made by a certified mechanic and documented. Collision insurance does not cover the car accidentally pushed off a cliff.

* Insurance is offered for the best new models. Bumper-to-bumper warranties are offered only on new cars. Because they roll off the assembly line, the car has a low risk profile and relatively consistent, satisfying the actuarial test for insurance pricing. Furthermore, car manufacturers usually wrap at least some coverage into the price of new cars in order to encourage an ongoing relationship with the owner.

* Limited insurance is offered for older model cars. Increasingly limited insurance is offered for older model cars. Bumper warranty end-to-bumper, power train warranty eventually expires, and the number of collision and comprehensive insurance continues to decline based on market value of the car.

* Car certain older qualify for additional insurance. Some older cars can qualify for additional coverage, both in terms of a guarantee for increased car use or collision and comprehensive insurance for vintage cars. But such insurance is offered only after careful examination of the car itself.

* No insurance is offered for normal wear and tear. Wiper blades should be replaced, brake pads wear out, and bumpers get dings. This is not an insurable event. To the extent that a new car dealer will sometimes cover some of these costs, we intuitively understand that we are "paying for it" in the cost of the car and that it was "not really" insurance.

* Accidents are only insured for the event's oldest car. Accidents are generally insurable events even for the oldest car, with few exceptions the service does not work.

* Insurance does not return all vehicles to pre-accident condition. Car insurance is limited. If damage to the car at any age exceeds the value of auto, insurance company then pays only the value of auto. With the exception of vintage cars, the value assigned to auto drop from time to time. So while the insured accidents at any age of vehicle, the more limited amount of accident insurance.

* Insurance is the price for risk. Insurance is priced based on risk profile of both car and driver. Auto insurance companies carefully inspect both when setting prices.

* We pay our own insurance. And with few exceptions, car insurance is not tax deductible. As a result, the fear of increased insurance rates due to traffic violations and / or accidents changes our driving behavior and sometimes we choose our cars based on their insured.

Each of the above principle is supported by solid actuarial theory. Although most Americans can not describe the theories underlying the actuarial, most people understand the principles on car insurance at the intuitive level. To be sure, as the car is really needed is for our lifestyle, there is no strong national movement, accompanied by moral outrage, to change these principles.