Insurance companies are private organizations designed to make as much profit as possible. This is done by collecting as much in premiums as they can while reducing the amount they are required to pay to their customers. I will be talking about auto insurance specifically, but all privatized insurance follows the same pattern.
Every state, besides New Hampshire and Virginia, requires car insurance. Virginia allows you to pay a $500 fee if you decline insurance. That probably goes towards the state to cover the increase in court cases because two uninsured motorists had an accident. Insurance is required because no one wants to have their car struck by someone else and have to pay for the damage they caused.
Rates are dependent on how much coverage you want and your driving history. But the average is $2,000 per year. Ranging from $940 if you live in Maine to $3,200 if you live in Florida. Now, consider that each car is held for an average of eight years. American drivers have to pay an additional $16,000 for the life of their vehicle. This is 33% of the value of the typical new car.
A new 16-year-old male driver may have to pay $10,140 yearly in premiums.
When you ask, “Why is auto insurance so high?” You will be berated with the demographics that influence how much money you will have taken from your bank account each month. I can wrap my head around actuarial science. Why is the average $2,000 per year and not $200?
Sure, the answer is capitalism. Supply-and-Demand. There are many different auto insurance companies, and customers do have choices. But companies all follow the same model. You can find the lowest price, but you can’t go to zero. You get a minimal reward for going years without claims. You are severely punished once you do have an accident.
You also have to apply individually to each company online. Or feel the pain of giving out your phone number to an online website that will fail at finding you the best option. Or go through a broker who says they are finding you the best deal when really they are favoring the one that gives them the largest commission.
Automobiles are treated as a right in America. We should be able to go wherever we want when we want. We do not support public transportation, but we also are okay with insurance companies taking thousands from us each year.
Keep trying to figure out how much collision and comprehensive you can afford and hope an accident doesn’t bankrupt you.