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I can't stop typing...I can't stop typing...I can'
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6,037 Posts
Discussion Starter #1
Do you REALLY understand the point to car insurance?

There are quite allot of things about Car insurance people don't understand, from how things work, what covers what, what deductibles do, and even how to use insurance. For today I will cover; coverage.

Automotive Insurance is exactly what it sounds like, insurance. It is designed to protect you from financial disaster. It is NOT designed to help you out with ever little thing that goes wrong with your car. This is the reason people with bad credit face higher insurance rates than people with good credit. If someone is in bad financial shape, any type of accident with there car, no matter how minor, could spell financial disaster. Therefor no matter what happens they will need to make a claim.

People with good credit are usually in better financial shape, and therefor more able to pay for things out of pocket. If they have a minor accident and there is just $500 or $1,000 in damage to there car they will just pay for it out of pocket. Sure they may not like doing it, but its the sensible thing to do.

Many people try to save money on insurance the wrong way, they get very low, or no deductible and get the minimum coverage required by law. The problem is that first few $100 is the MOST expensive part of your insurance and that low deductible will rases your insurance cost ALLOT. The reason is because people make the mistake of using insurance for minor claims. Rasing you deductible from $0 to $1,000 can save several hundred $ a year on insurance. Even if you do get into a minor crash here and there it will probably still be the cheapest way to go. Now the correct way to get insurance is set the deductible as high as you can safely afford, and simply pay for minor problems out of pocket. There are allot of things insurance doesn't need to know about, and don't need to be on your record making you a "higher risk" to insure and thus rasing your rates.

Now as for your coverage amount; You get insurance to cover yourself from financial disaster. Imagine you rear end and total a $100,000 car, paralyze the driver, who was making $250,000 a year but can no longer work, and now has several $100,000 in medical bills. You are now financially responsible for that person for the rest of there and/or your life. If you decided to save a few $100 on your insurance with a $0 deductible, with a $10,000 limit, and you did $1,500,000 in damage to this person, your insurance will pay JUST the first $10,000, YOU are responsible for paying the additional $1,490,000. Now imagine you did things the other way around. You got the highest deductible you could afford ($1,000) and you got as much coverage as you needed, $2,000,000. If you had the accident this time you would pay the first $1,000 in damage and INSURANCE would pay the $1,490,000 in additional damages you caused. In these case insurance did what it suppose to do, it protected you from a worse case scenario what would have caused you a financial disaster.

Now how do you decide how much coverage to get? Well that depends on what you are worth, your net worth to be more exact. Net worth is everything you own, minus your debt. So say you have a $30,000 car, $300,000 house, $10,000 in savings but you still owe $150,000 on your mortgage, and $2,000 on credit cards. Your net worth would be $188,000. If you are a relatively poor person and just not worth much (you don't make allot of money, don't own any real property) well then you don't need as much coverage as someone who makes allot of money a year, and owns there own home. No if you do damage all that person can do is go after you for "all your worth" IF you have $5.00 to your name that's all they will ever get, if you have $500,000 to your name, well that's what they are going to get. They can't squeeze more money from you than you have no matter how hard they try. So there for you should cover your self for all your worth, because people will go after you for all your worth if you cause enough damage. The person worth $188,000 should have at least $200,000 in coverage. If your worth a million you should have $1,000,000 in coverage. The good news about these huge policies are there not that much more money. The reason is the you are far less likely to make a $1,000,000 claim than a $200 one. To add an umbrella policy to increase your coverage from about $250,000 to $1,000,000 may only be $200 a year.

When you look at the big picture, having the wrong insurance coverage may save you a few $100 now, but I may cost you millions later on, as well as your financial security, and everything you own. Everyone hates making those insurance payment, but just remember that its there for, and stop thinking like you have to get your every dime back out of them. If you do this and rethink how you see insurance, you will be able to make it work for you, not against you. Just make sure you think this all over before you get back in your car.
 

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Inebriated Pecker Obstructionist
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2,958 Posts
It still comes down to the almighty dollar.
I think most peoples complaints about insurance companies, is their willingness to collect a check from you every month. But, when it comes down helping you fix your car that was in an accident, the try give back as little as possible, and then fight with you for that.

When I had my accident, I was rear ended by a guy merging onto a freeway full of traffic that was doing about 5-10mph. He came on at about 45mph. He hit me, and knocked my car into the back of a pick up truck. Now I have front and rear damage to my car. The original estimate from his insurance adjuster was just over $2000. The total bill came out to right under $5000. It was six weeks of being dodged by, and fighting with this guys insurance company because they said the 2g's should have covered the damages, and they didn't want to pay any more. Thats why they are called "estimates" because you don't know what is exactly wrong until the car is broken down in the shop.
But, the real kicker was what they gave to replace both headlights($100 for one, and $60 for the other). The place they called for pricing was a wrecking yard, and never had the lights to begin with. So I had my body shop locate some. The nearest set of used headlights was well over 500 miles away, and they were $200 ea! Ok, the insurance approved the headlights at $400 for both. I told the body shop to just buy new headlights because they were actually a few dollars cheaper than the used ones, and they could be picked up from across the street, as opposed to having them shipped in. I ended up paying the $400 for the headlights because the insurance said they never approved the purchase of new lights, even though the used lights were slightly more expensive!
I almost punched the insurance guy in the face when he told me that!
When there is no willingness to bend, or help a little, you just end up pissing people off.
 

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I can't stop typing...I can't stop typing...I can'
Joined
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6,037 Posts
Discussion Starter #3
Oh I'm not gonna try and argue insurance companies aren't assholes, but allot of people just don't get how to use them. If you know there gonna give you grief over paying for any repair, why not try and avoid using them? Set your deductible at $1,000 and just pay for the problem out of pocket, and don't give them as much money in the first place. If you don't have a problem over a few years you will save $1,000 and even if you do have a problem oh well that's life. At least you didn't have to go through a bunch of bs and then have your insurance rates go up. I know from personal experience Insurance companies will try and screw you. I had a crash where my old focus was totaled, my rates went up so much for claiming the car that I would have been better off just paying off the $10,000 I still owed on the car out of pocket and not making a claim. With my recent focus I just had another mishap where someone ran me of the road, and then ran. I just paid the $2,300 repair cost out of pocket, because it would have cost me more than that in the long run to use my insurance. The only problem I have now is my Finance company wont let me have above a $500 deductible. Rasing my deductible to $1,000 would save me about $1,000 a year.
 
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