Car Insurance Thread

[maryfield48]

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Yeah, that another one of the problems, the insurance knows the exact coverage people are required to have, so that is expensive, but adding more to it really doesnt add much more in cost, so I generally get better than the minimum, as I believe my benefits are double the minimum and it made my yearly premium go up like 10% or so.

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That's not why the additional coverage is so cheap. At least it's not the only reason. If you think about it you will quickly realize that the first $100k of coverage is much more likely to be called on than the next $100k. It's a function of the Frequency/Severity relationship.

As to your main argument, I think that the fact that auto insurance is mandated by law has the effect of lowering prices per dollar of coverage, since if it were optional, the people who buy it would be worse risks on average than the general car-owning population.

It's the same reason individual health insurance is usually so much more expensive than group policies - anti-selection.