“The premise of insurance is to spread the risk. It’s the premise of homeowner’s insurance, car insurance, and health insurance. It’s one reason why it’s important to have insurance when you’re healthy so that when you get sick, you won’t go sign up just when you get sick because that increases the cost for everyone.” – Jeanne Shaheen
Are you a motor vehicle owner? Do you have car insurance? Do you know whether you have vehicle insurance or not? If you financed the vehicle purchase through a bank or financial institution, it is mandatory to have a comprehensive vehicle insurance policy. Additionally, most of the US states require drivers or car owners to take out motor vehicle insurance.
One the one hand, it is reasonable to ask why it is necessary to take out motor vehicle insurance when you are a good driver? You are confident that your driving will not cause an accident.
By way of answering this question, let’s look at several reasons why motor vehicle insurance is mandatory even if it is not legally required.
Mitigates the risk of incurring financial ruin
The first sentence of the quotation mentioned above provides the fundamental reason why you should sign up with a car insurance company. In summary, the raison d’etre behind insurance, albeit car, health, and life insurance, is to spread the risk of a massive pay-out to an insuree.
The risk of having to pay for a car accident is calculated when the car owner takes out an insurance policy. While these calculations can be quite complex, the premise is that the higher the risk, the higher the monthly insurance premiums and vice versa.
Succinctly stated, the risk is fundamentally determined by looking at the car owner’s driving history, the driving record, as well as the number of claims in the last five years. The worse the driver’s driving history and driving record, and the more claims paid out in the previous five years, the higher the premium.
Juxtapositionally, a good driving record, no negative details on the driver’s driving history, and the fewer claims paid out in the last five years translates into a low monthly premium.
At this juncture, it’s vital to note that should you be involved in a car accident and need to claim from your insurance, it’s a good idea to enlist the help of a Los Angeles Allstate insurance lawyer. Otherwise, you could end up being paid less than what you are due.
Protects you when the accident is not your fault
The assumption made at the beginning of this article is that you only need motor vehicle insurance if you are a poor driver. Consequently, there will be a high risk of a road accident caused by your driving.
What has not been considered is the fact that you might be caught in an accident that is not your fault. You will still need to claim from your insurance for the damages to your car. And, then your insurance company will claim from the person who caused the accident’s insurance.