Automobile Insurance in the U.S.

28 November 2016
Car Insurance Form with Car - Banner Image for Automobile Insurance in the U.S. Blog

Almost everybody who owns a car in the U.S. buys auto insurance. (Those who don’t are breaking the law.) The main reason for buying auto insurance is that first, the U.S. law requires that a person have it to legally operate a car. The second reason is that it protects the policy holder from major loss in the event he gets in an accident. Should he have an accident and incur damages to his and another person’s vehicle, the insurance company will pay him all or most of the funds necessary to make the necessary repairs, thus protecting him from a lot of financial strain.

To back step a little, let’s just look at insurance. What is insurance? We might say it’s a device that allows economic equilibrium for a person in the event of loss. That’s what it is from the policy holder’s perspective. Should he have an accident, have his car stolen, etc. he doesn’t find himself faced with large, immediate financial obligations. In many ways, by paying his regular premiums to the insurance company, he is slowly paying for a claim that may occur down the road.

Now from the insurance company’s perspective, what they concern themselves with is risk and reward. Risk is the amount of money the insurance company agrees to pay in the event of a claim, and their reward is the premium the customer pays to them, the insurance company. To the insurer, risk must always equal reward.

Let’s look at an example of risk. From experience over the years, insurance companies have discovered that people with low credit scores are a greater risk to them than those with higher credit scores. They have found that people with low credit scores have a predisposition to open more claims than those with higher scores. Thus, in order for risk to equal reward, the insurance company charges more money to individuals with low credit scores, since those types will open more claims, thus incurring more risk (payouts) for the insurance company.

So, that’s a quick look at auto insurance and what it’s all about. All too many people think that money is the chief concern with insurance companies, when in fact, the key concern for them is risk and reward which always have to be equal. We hope this gives you a better understanding of auto insurance.

Leo Simental - Inszone Insurance Training Specialist

Leo Simental

Personal Sales Team Manager

Leonel Simental is a Personal Sales Team Manager at Inszone Insurance Services. As he entered the industry in 2011, Leo knew that insurance expertise was critical in delivering a high level of service to his clients. He worked diligently to master the concepts and afterwards found he was able to bring a unique value to each interaction by utilizing that knowledge to provide solutions to even the most complex scenarios. Leo quickly grew his customer base and to this day continues to impress with his knowledge, consistency and care for each and every one of his clients.

With Inszone since 2015, Leo has won multiple awards and has been integral in the growth of the Personal Lines Division. If you’re looking to improve your insurance situation for home, auto or other personal policies, Leo is the first and only call you will need to make.

Outside of the office, Leonel enjoys spending quality time with his wonderful family, hiking and staying active.

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