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Mandatory Auto Insurance

October 22, 2005 by Jonathan Stein

As you probably know from now, I am not the biggest fan of how the insurance companies operate. However, after reading this thread from a Google group, I have to say that some people just dont get it at all.

For those of you who do not want to read the threat, which started as discussing cameras and ended up on auto insurance (a trick not even I could pull off), the gist of it is that the poster thinks mandatory auto insurance is a scam and that the insurance companies should not charge you per vehicle. His thinking? He can only drive one car at a time.

Let me address these one at a time. First, mandatory insurance is a good thing. Why? Because if you drive a car, you have to be responsible for the damage you cause. Why would it be fair for Joe Smith to be walking on his street and get hit by Mr. No Insurance who has no insurance to pay all of the medical bills? Mr. No Insurance may not have any money to pay for the medical bills. If that is the case, then he gets off for injuring someone who did nothing wrong. That is not how our legal system works. Insurance is just a mechanism for transferring the payment from Mr. No Insurance to the insurance company. It keeps the price down because the insurance company collects money from a lot of people but does not pay out on a claim for all of them.

Second, the insurance company should charge you for every vehicle you own. If you have read my prior posts, you know about first party and third party coverages. (If you have not, go back and read them.) The insurance company rates, or charges, you on first party coverages based on the cost to repair the vehicle. If I own a 1985 Dodge Charger and a 2004 Corvette, the cost to repair the two vehicles is way off. The insurance company has to charge me for both of these. For liability coverage, a similar thinking applies. A 2004 Cadillac Escalade is going to cause more damage than a 1977 MG Convertible.

Basic fairness requires you to be charged for each vehicle you own. If, like the poster, you own 5 vehicles, be prepared to be charged premium for each. If you do not like it, then sell off one or two. And dont complain about mandatory insurance – it protects you when someone hits you!

Categories: Auto Insurance

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