At first glance, you may think those car insurance companies either make a lot of money or lose a lot of money, depending on who you ask. Basically, what they do is try to cover a lot of people and weed out those that are most likely to have accidents. There will always be accidents happening, but by doing a better job of filtering they can gain an advantage over other car insurance companies and stay profitable. Here are some of the ways they really earn money, according to a car accident lawyer Irvine.
It’s All About Reducing Costs And Increasing Income
Most car and homeowners insurance companies make very little profit off of that part of their business. However, they make an incredible amount of money from life insurance and other types of add-ons that they offer. For that reason, you’ll notice that your insurance agent never likes to write a low-ball car insurance policy with the lowest coverage and premiums. He’d rather get you to cover extras like towing and road service, stereo coverage, or increase your liability levels because his profit margin goes way up on the extras.
Then, you’ll notice that he’ll start calling you to set up an appointment in order to show you his life insurance plans. One for the wife, another for the husband, and then coverage for the kids as well. This is where the real money is made in car insurance, not from fixing the cars that get wrecked, and not from paying your medical bills when you’re injured but from the premiums you pay on your life insurance.
They also go to great lengths to cut corners on all of the car repairs at the auto body shop that they can. They do this by substituting lower quality fenders and parts whenever possible. There really is no way for them to profit from car accidents but by saving money they can earn more.
If you have questions regarding your auto insurance you should start by contacting your agent. Most of them are honest enough to tell you exactly where the profit is made in the industry and it’s not from car or homeowners insurance at all.