A Closer Look At Auto Insurance

If you are like most people, you dread paying your hard-earned money for something that you may but hopefully will never need. It's kind of like paying a lot of money for an annual retainer fee for a lawyer.
Like a credit card bill, your insurance premium appears "automatically," you pay your premium, and then go on about your life. Besides the coverage protections itemized in your policy, have you ever thought where your money actually goes and how it is spent by your insurance company?
By understanding the insurance industry better and how your insurance company spends your premiums, you can better decide how to customize your coverage to maximize your coverage and/or save yourself money.
As we can agree that paying insurance premiums is like keeping a high-priced lawyer on standby, unless you get involved in an accident where your insurance company covers accident costs up to your policy limit, your insurance premium actually goes into a collective pool of insurance premiums. These premiums are used to cover all driver accidents by the insurance companies. Therefore theoretically, if all motorists drive more responsibly, fewer accidents will occur, insurance companies will pay out fewer claims, and every motorists' insurance premiums will decrease.
Obviously, the bulk of our insurance premiums is used by insurance companies to cover accident claims, but a significant percentage, roughly 50%, is utilized to run the insurance companies and cover administrative and legal expenses.
Of course since insurance companies vary on how efficiently they are run, save, and invest, so too are the premiums they offer. So it pays to shop around.