It’s not a scam, it’s just how companies work. By definition, every insurance will pay out less than they collected in payments. They have to pay their employees, their offices, taxes an yes, also their shareholders. That’s why, on average, insuring something is always a loosing bet.
You should only insure yourself against things that are potentially threatening your or your family’s existence: Liability, health, home, occupational disability, survivor benefits. For everything else it’s almost always better to just put the money into an account to have it at hand in case.
You should only insure yourself against things that are potentially threatening your or your family’s existence: Liability, health, home, occupational disability, survivor benefits.
That, and anything that’s legally required (such as auto insurance if you want to legally drive a vehicle)
Insurance should always be public. If you feel the need to say things like “companies need to pay their shareholders,” you are only one braincell away from saying “gotta keep the lights on”.
Why should a travel cancellation insurance or a mobile phone insurance be public? You can take out an insurance for almost everything, from wedding insurances for when your spouse gets cold feed to alien abduction insurances. I don’t see why the state should be involved in that.
And of cause companies need to pay their shareholders. That’s how our economy works. Even if an insurance is state funded, it needs seed money, and that money costs interest. Either the state (i.e. you) pays the interest, or the insuree (i.e. you) pays the interest, but it has to be paid for either way.
Nobody’s talking about wedding insurance. The OP specified car insurance that you are legally required to have in many places in the US.
Nobody’s talking about wedding insurance.
I am. You know that topics can change or broaden during a conversation? I was explicitly talking about existential and non-existential insurances, and buttnugget responded with
Insurance should always be public.
which then would also include non-existentials. Also, car insurance in its broader sense is neither existential, nor is it legally required. What is required, is liability insurance for your car, because not having it and causing an accident could destroy the existences of you and your victim, by putting you into bankruptcy and your victim unable to realise their claims against a bankrupt person.
You can also insure your own car against all kinds of damages, from theft to engine failure, from collision to hailstorms. But that is not legally required, and usually it’s also not existential, unless your existence was threatened by loosing your car. Even the OP talks about non-existential car insurance, as they want their insurance to pay for their check engine light.
You know that topics can change or broaden during a conversation?
You don’t have to talk down to me or insult anyone else. I’m well aware of how basic conversations work, and the other person is trying to share their ideas.
What I mean is that you’re pigeonholing the conversation. You’re talking about perpetuating the system, as if insurance somehow needs to stay the way it is as a huge capitalist scam rather than reimagining it, especially when government systems are involved. And even then, I don’t see why insurance can’t be reformed or socialized for any of these purposes with the right framework. You’re coming at this by saying this is how it is and therefore this is how it should be.
But my bad, I forgot that in the US, even the wrong sneeze can send you into bankruptcy. It’s like Americans cling to this broken system to avoid being crushed by the weight of their own economy by pushing the problem somewhere else and turning it into monthly payments.
You can change the system all the way you want. But even a co-operative insurance in a communist society will have to spend money on other things beyond damage claims. Thus even they will take more money from the insuree, than they pay out.
Even if your insurance is only a pot where everyone throws their money in, and takes it back out when they need to, someone still had to buy the pot.
It doesn’t matter how you organise it, paying insurance premiums will – on average – always be a loss. That’s neither a good thing nor a bad thing, it’s just a fact. The important part of insurances is the “on average”: The vast majority of people will never cause a million dollar damage, so they can pay a tiny share of the damages caused by the one unlucky person who does.
Instead of being mad that you paid for the car insurance and never needed it, you should be happy that you didn’t end up in a car crash, destroying someones life. Instead of being sad that you paid for your health insurance for 90 years without ever needing it, you should be happy that you aren’t the one who had to spend years in hospitals fighting cancer. And instead of paying an insurance premium for your phone, you should put that money in a piggy bank and take it out if your phone ever gets stolen.
will have to spend money on other things beyond damage claims
Isn’t that what the government does with everything else? I don’t understand why this is a special case. They already take in a whole lot more taxes than they give out in services, and that’s fine. It’s understood that there’s an operational cost. But insurance, as it stands, is arguably little more than a mandated expense for the great majority of people.
Instead of being mad that you paid
I’m not mad that I pay for services. I’m upset that people are being denied claims, that not even a fraction of the money that had been paid for decades is available for other kinds of emergencies or basic needs because it’s a money sink where it all disappears under the pretext that you may need it some day under some specific circumstances as outlined in the fine print, that it’s mandatory to buy into this system, that it’s being touted as a necessity without giving a chance for alternative systems, and that the execs do everything in their power like raising premiums over bullshit solely for profit at the expense of people’s lives. There’s really no need to excuse this system as it is.
In Germany this is usually pretty well handled, you paid a bit more for full coverage and they cover all costs of repair etc. But if you’re in lots of accidents each time your insurance cost rises. If you have little to no accidents for a few years, the insurance cost sinks. It is also mandetory for your vehicle to have insurance, avoiding sudden private insolvency.
To be clear, you need liability insurance for your vehicle, so if you cause harm to someone else their claims are covered. You don’t need to have insurance for your own damages. The state doesn’t really care about your solvency, only for the solvency of your potential victims.
You are correct, thanks for the clarification.
I mean, for car insurance you could just look up what a good insurance would cost you and put that money into a savings account if you’re a careful person. It’s a gamble, but most accidents you have are probably going to be fairly cheap. This would not be a good advice for home insurance as you wouldn’t be able to save enough to buy a new house if yours burned to the ground.
Insurance is mandatory not for you to repair your car but to protect other people that might suffer from you causing them damages (be it nateiral or even on their body).
Yeah, you buy the mandatory bit and put the rest into a savings account. Got a friend who saved a lot of money this way. But it’s a gamble. You could wreck your car on day one.
There are legal requirements for how much money you have to have set aside to qualify as “self insured”. Car insurance is not required for your own costs: that kind of “full coverage” is optional. “Liabilty insurance” to cover the damage you do to other people’s property is legally required, and self-insuring is allowed, but the required liquidity to self-insure is more than most people have.
At least in the USA, depending on the state it is illegal to not have car insurance on your car
Well because if you crash right after making the insurance there won’t be enough in your “savings”.
What if we do pay insurance and never get hit?
To me, both are not ideal. But somehow we as a society have accepted one as default and other as an extreme.
And the default one just happens to benefit the “shareholders” and not the everyday people.
(Btw the taxes we all pay could easily cover the costs of occasional accidents, and accidents could be reduced by proper regulations)
I mean thats the point, you are paying for reducing risk. If there is enough competition between insurers the average profit they make should be quite low.
Conceptually at least, if you never get hit, your premiums paid for the repairs of other people that did.
That’s the idea, no one knows if they will get in an auto accident. Most people cant absorb the cost of the ramifications. Instead of every person saving the full amount to replace their car, pay for hospital stays, make someone else whole (which is a ton of money out of the economy and you know for sure a lot of people wouldn’t be responsible enough to do that) we recognize that the number of people exposed to being in an accident is less than the number of people that will be in an accident.
Everyone pays into the pool, if someone has an accident they get to take more out than they put in by design.
That’s where your money goes if you never get in an accident. Insurance companies also make a profit by managing that pool of money, and they are incentivized to only insure good drivers or collect more money from bad drivers (which is why rates go up if you get in an accident)
The alternative is that everyone starts their own savings account, one that would almost definitely cost more money, and the number of people that would just not save anything is probably pretty high because they would know that they can’t realistically save up enough.
Some comercial insurance, workers compensation specially, have something called technical excesses sharing where the insurance company give back some money if the client company had less claims that the premium paid. But that only offered to really big accounts.
And this would only make the insurance that much more expensive to everyone.
They are in different pools, it should not. It’s done to reward companies with strong workers security
A lot of people can afford an insurance premium, and perhaps a deductible, but won’t have enough for a $40,000 liability even if they saved for years.
What is suggested in this post is not much different from the past where poor people simply went on not having coverage and ended up in indentured servitude working off debts with manual labor like picking rocks. It’s also just a thread away from Health Sharing Ministries, which is just a catastrophic failure whose nuance cannot be accurately depicted in a short comment.
Then if you are in an accident or something happens to your car, they’ll try not to pay out and even if they do, they’ll make you pay even more every month, regardless of whether the accident was your fault or not. Oh and you have to have it where I live or you’re breaking the law.
Where I live, you can choose to not have it as long as you take $50,000 and put it into a bank account and secure it and not touch that $50,000 as long as you are driving without insurance.
What if you hit a lambo?
It doesn’t really matter either way. If you have 50k cash or a 50k insurance limit. The other party can settle for 50k or they can try to get more through sueing you. If they get a judgement for more than 50k (likely after years) then you have to pay, but if you don’t have a million dollars, they aren’t getting it anyway. From there they can agree to a payment plan or try to garnish wages or place line.
Sounds wild to me. In UK the third party liability insurance limit is usually in the millions.
It’s the difference between minimums and maximums. In most American states you have to have $50,000 worth of liability insurance to legally drive, which covers the majority of financial consequences for accidents.
That being said, now that cheap cars are $35,000 brand new, it might be a smart thing if you’re an American driver to have $100,000 or $125,000 worth of liability insurance to keep yourself from going bankrupt.
The extra $100 a year for that coverage would totally be worth it if you ever have to use it.
Also they will arbitrarily decide how much your car was worth. Did proactive maintenance and no accidents? Cool, now it’s assessed to be the same as if you had six unrepaired fender benders and kept raccoons in the back seat.
Same for the retirement fund tho. You have to be old to take some money out.
One car insurance company where I live operates kinda like this. USAA.
Every subscriber is a member. Every year, after they pay operating costs, they take the money left over from premiums and put it into accounts distributed across all the members. When you reach a certain age you can withdraw the money accumulated in your account.
I haven’t heard of this. What’s this benefit called?
Edit: I should take one minute before asking questions.
Member-Owned Structure: Unlike a publicly traded company that pays dividends to stockholders, USAA is a reciprocal interinsurance exchange, meaning its members are also its owners. Profits, after expenses and reserve requirements are met, are returned to members.
Subscriber Savings Account (SSA): A small percentage of the property and casualty insurance premiums paid by an eligible member is retained by USAA and allocated to an SSA in their name.
Annual Distributions: The USAA Board of Directors decides each year how much capital is needed for reserves. Any excess is distributed back to members from their SSA. This distribution amount can vary annually based on factors like the company’s financial performance and the member’s longevity and account balance.
Payout Options: Members typically have the option to: Apply the distribution to their insurance premiums. Receive the funds via direct deposit or check
Yeah I didn’t know most of that. I’m not a veteran so I can’t be a. Member even though I bank with them. Or couldn’t last I checked. I probably can now because my MiL is a vet.
…i don’t know man, i’ve been with USAA for fourty years and my dividends always amount to just a discount on my december premium…
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There are a lot of them like that called “mutuals” which are just insurance cooperatives. If you’re American you can probably get your insurance through one, although they aren’t as popular.
It’s amazing what you can do when you aren’t accountable to shareholders
The idea is that what you pay goes to a fund that is used when the insurer has to pay a client, therefore socialising the costs of fixing whatever the clients insured.
If every client could get their money back, the company would likely have less money available for the payouts (and would risk everyone taking their money out once a big payout is due), and might go bankrupt if too many payouts come up at once.
So instead the idea is that ideally you end up paying less than you’d get if you needed to fix whatever you’re insured for… but it’s like a bet: you bet that shit’ll happen before you’ve paid more, the insurer bets that it won’t.
Of course, though, like in all businesses based on gambling the house always wins.
Even if they weren’t scamming you, they’ve got actuarial tables telling them how much you have to pay to make sure they’ll have a certain amount of profit… but of course they are scamming you, and they’ll do everything possible to avoid paying you even in the unlikely event that you fall on the wrong side of the actuarial table.
Actuarial tables are only used on life (life, retirement, workers compensation, health insurance) on top of them you need guaranteed interest rate and that give the risk price, but can be mathematically prove that charging only the risk price the insurance company eventually is going to fail, so an actuarial rate is added to avoid that. On top of that, another rate is added for administrative costs and “cost of capital” AKA profit for the shareholders. Finally, comercial costs are added and that’s the price you pay.
For casualty (no life) the risk price is probability of event × cost of event, the rest is the same.
Insurance is a brilliant, beautiful idea. People come together to pool resources so that in the rare event that a catastrophe befalls someone, that unlucky person does not lose everything.
The idea of insurance went wrong when for-profit companies were allowed to get involved. Public insurance is cheaper and better. I’m not sure if it is still the case today, but until a few years ago public insurance in Saskatchewan cost a couple hundred bucks a year while people in other provinces were paying $1500 for the same coverage.
Can confirm, SGI still exists in Saskatchewan. It is definitely more than a couple hundred bucks a year but it is nice knowing that they don’t make a profit. They sent everyone a rebate a few years ago because they had a surplus
Here is an exhaustive list of things that were improved when it was made for-profit:
The biggest thing with auto insurance isn’t covering your car, it’s covering the cost of whatever you hit sueing you.
Your car may only be worth $3,000, but if you hit a pedestrian and they require a dozen surgeries and are wheelchair bound for life, you bet you’re ass you’re getting sued for a few million in medical costs.
In a reasonable country, those medical costs would be free, but since they’re not you need some sort of protection against once accident bankrupting you in civil suits.
In a reasonable country, public insurance would charge your auto insurance to recover costs. The harms and risks of car ownership don’t need further subsidies
In reasonable countries they do exactly that. The health insurance ensures that your victim gets the required treatment. But they also ensure, that in the end the damages you caused aren’t paid for by the public.
I never really thought about that before. That’s probably why america hasn’t had healthcare for all, the insurance companies are lobbying (bribing) the shit out of the republicans.
I DETEST both-sides-ism, but yeah actually in this case, both sides are being bribed and blocking true progress, just the paid off Democrats have been doing it more quietly by slow playing and avoiding real single payer solutions when the party actually has power.
When was the last time they had enough power to pass anything like that? It would take a 2/3 majority.
Health insurance companies are lobbying the shit out of both parties. Car insurance companies would love universal healthcare. It would drop their outlays which would increase their profits.
Maybe you’re right and I’m wrong, that would make sense.
I have no insider knowledge, that’s just my bullshit take.
It’s in you’re contract how much they’ll pay out for this. $50-$100k is common. After that it’s on you. But you’re right in the sense that law suits often happen to seek this amount.
I love the idea is the only thing justifying one racket is another racket
Why is car insurance so expensive in all the other countries then?
Third party liability for my policy is a few million last time I checked, if you somehow cause a heavy truck to crash or damage a piece of infrastructure you can run into those figures pretty fast.
In addition to what everyone else said, property damage is a big part of it as well.
Let’s say you run into a building and knock out a load bearing wall. Or plough through a business or government office. It’s not impossible to rack up a couple million in damages if you crash bad enough.
##ItsAScam
Real answer: in most other countries you can be punitively sued, ex: if a person wants to recoup the emotional damages from being crippled. You can also, depending on the country, be made to cover the cost of services provided by the medical system if you were found to be at fault (I don’t know how often that happens for an individual vs. a large company, but that’s how the rates were explained to me by a UK colleague)
Plus there are things not covered by healthcare, and loss of income etc
Repair costs for two vehicles outside the US is probably just as expensive as a doctor’s visit for a single person inside the US.
I self insure. I keep my state minimum and pay what I would pay in collision to myself in an interest bearing acct until I reach the replacement cost of the vehicle. Took a while the first time but after those first few years it has been worth it.
Hope you never get sued after an accident
The minimum coverage of my state covers that. I’m required to carry liability insurance
Only a few years? What’s the math on that? I looked into it and the minimum was 20k. When I looked at it I think it would take around 40 years to break even on premiums. It’s not about the replacement cost of the vehicle but about damages that you could be liable for. If you’re liable for a hospital bill, that minimum won’t go far.
The state minimum insurance for me is liability which covers all damage to other people’s vehicles and injuries. What I insure myself for is damage to my vehicle. It costs $220 for full coverage and $20 for liability. I pay myself the $200 until it reaches the depreciated value of the car. After the first car I had enough money to buy in cash and just keep the fund going. I still pay the $20 a month to GEICO because it’s required but I now can replace my vehicle in case of a wreck. After 5 years that $200 is $12k. All the gamble was on the first car after that not a problem as long as I don’t try to buy a new or luxury vehicle.
Wait to get hit?
I don’t think you’re doing it right.
Step 1 make sure you have gap insurance.
Step 2 never make more than the minimum car payment.
Step 3 when your ready for a new car, side swipe a car on the left and drive into a brick wall on the right. Make sure there are no cameras.
Step 4 enjoy your new car.
Step 5 commit identity fraud so you can keep a low insurance premium!
Step 6 do none of this because it’s all crimes. I really hope you read the instructions to the end before starting.
Hi, I followed your comment while reading it. I’m stuck after step 3, the police are asking lots of questions. Pls help.
New number
Who dis?
I really hope you read the instructions to the end before starting.
“Remove the diskette from its protective envelope” (it stayed in the box)
“Take the diskette by one of its corners” (“What corners, it’s round?”)
There is plenty to criticise about insurance companies, how did they stumble upon the one thing that is fine?
All insurance companies and lotteries take in huge amounts of cash and pay relatively little back. The whole economy is a scam if everyone needs “insurance”.
