I recently dealt with a large (50%) auto insurance premium increase as a result of an accident (which was my fault). I’m frustrated with making insurance payments for years and years without asking for a penny, and then when I actually need the insurance company to do what I pay them for, they penalize me. I understand the need to establish benefits for good drivers, but ~$1,000 in claims over four years must qualify me for the lowest risk category – unless they’re including a $0 group, which would seem almost dishonest. (If there’s a zero risk group, then they wouldn’t need insurance.)
I try to be constructive, though. So, instead of just feeling used, I came up with how I think the system should be run – or at least an alternative. Rather than paying up front based on how the insurance company estimates the risk of insuring you, why not just borrow money when it’s needed and then pay it back at a specified interest rate?
This would have to be contingent on the credit of the insured, of course – something probably reflected in the interest rate and maximum loan amount. Also, perhaps the program would only be available for those above a certain credit level. In any case, it would simplify so many things. Why worry about specifying the details of your coverage (e.g., rental car, deductible, etc.)? Why be burdened with providing evidence to be sure you get the coverage you need? Just specify how much you want to borrow and take care of things.
In fact, why involve an insurance company at all? If you can get pre-approved for a bank loan (based on your home equity or something else) that is large enough to meet the minimum coverage requirements (e.g., in Texas: $25,000 for bodily injury or death to one person per accident, $50,000 for bodily injury or death to two or more persons per accident, $25,000 for damage or destruction to other property in an accident) why couldn’t that be enough to be considered self-insured?
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