Many people are confused by the apparent inconsistencies within the insurance industry. This article will clarify one such issue. You’ll be able to save more money without having to compromise yourself once you have a clear understanding of the issue.
You must first understand that insurance companies exist to make money. You’ll miss most of my words if you don’t understand this. This does not mean that they do not provide value-added services. They will only do so in the hopes of making a profit.
You’ll see that insurance companies play a sort of probabilistic game. I want to make this clear…
If an insured profile has one claim of $20,000 per 200 insureds annually, then the insurance company will still be profitable if they charge a $200 premium each year. 200 x $2000 = $40.000 However, if another profile made 10 $20,000 claims per 200 insured annually, they would not make a profit, even if the premium was $1000.
What can you learn from this? The lower your premium will be, the less likely you are to make a claim.
This is only the beginning. Different companies consider different profit margins. Different companies also use different weightings to determine the likelihood that someone will file a claim.
You’ll be well advised to take two actions.
1) Reduce the likelihood that you will need to file a claim.
Compare insurance quotes on comparison websites. You can use them to find the insurance companies with the best value and price. It is possible to find a $2000 difference in insurance policies between two companies.
These are my favorite insurance quote pages.