Introduction: What is all this Insurance?This article conveys to the reader a personal problem that I have with car insurance companies. Many people do not think long enough when they are paying out for car insurance. Aside from the fact that many do not use comparison websites, the ones that do tend to find the cheapest fully comprehensive insurance and be done with it. If this sounds like you at all I implore the reader to take not of the following article. The reader should gain an insight into how to optimize their choice of car insurance. For one thing the reader should learn the value of closer analysis into financial matters, appreciating that there are always more options available than the obvious few.
There is no doubt on the matter car insurance is incredibly expensive. I believe that given the choice many people would not opt for car insurance. Unfortunately however, it is a legal requirement.
I have a slightly alternative way of looking at buying car insurance...and hopefully it's a more money efficient method. I make a few assumptions:
- When it comes to small bumps and scratches most people pay to fix their car themselves (and not allow insurance companies to get involved) as they reason that they will save more money in the long run by not losing their no claims bonus and not having their premiums put up.
- Once a car is purchased it loses on average half its value as you drive it off the forecourt
- I am assuming a UK car market and UK law but I assume that most economically developed nations have similar issues
- Insurance companies exist to make money by having people pay them more than they ever have to pay out (simple business set-up....or not!)
Types of Insurance
- Third Party: is a legal requirement ensuring compensation is paid when there is injury to another person or their property as a result of your driving. However, it doesn't cover costs incurred by you as the result of an accident (remember here that we have assumed that most people pay off most of the damages themselves, unless the costs are too great).
- Third part fire and theft: provides the same cover as above but also insures against the risk of your car being damaged by fire or being stolen.
- Comprehensive: provides the same cover as previous, however it covers you should your vehicle be damaged in an accident. Other additions may include: courtesy cars, insurance for excess and legal expenses, roadside recovery, and vehicle repairs