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What is ‘Auto Insurance’?

An auto insurance is a policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

Breaking Down ‘Auto Insurance’

Auto insurance premiums, or the amount policyholders pay to be insured, vary depending on: age, gender, years of driving experience, accident and moving violation history, and other factors. Most states mandate that all vehicle owners purchase a minimum amount of auto insurance, but many people purchase additional insurance to further protect themselves.
A poor driving record or the desire for more complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk, which means increasing your deductible.

Standard ‘Auto Insurance’

Auto insurance offered to drivers considered to fall into an average risk profile. Standard auto insurance for a driver takes into account that driver’s characteristics, and the premium charged is based off of actuarial information compiled from similar drivers in the past.

Being able to estimate the risk in underwriting a new policy can make or break an insurance company. If the company prices the policy correctly and understands the claim risk it can be profitable, since the premiums it brings in will exceed the benefits it pays out. If the insurer does not effectively understand the risk associated with underwriting a policy it can wind up paying out more benefits than it receives in premiums.

Breaking Down ‘Standard Auto Insurance’

Being able to estimate the risk in underwriting a new policy can make or break an insurance company. If the company prices the policy correctly and understands the claim risk it can be profitable, since the premiums it brings in will exceed the benefits it pays out. If the insurer does not effectively understand the risk associated with underwriting a policy it can wind up paying out more benefits than it receives in premiums.