In the world of life insurance there are two different types of policies; whole life (lasts your whole life) and term life (lasts for a fixed number of years).
When you buy term life insurance you pay a small premium and if you die within the confines of the insurance contract a payment is made to the beneficiary. Normal exclusions include suicide, fraud, war, riot and civil commotion. These exclusions are in place to keep people from scamming the insurance companies.
Whole life is seen as more of an investment opportunity than an insurance policy. The premiums are much higher than in a term life policy but the money invested can be made available to the policy owner before death.
Now I'm not an insurance salesman and I'm sure I butchered a thing or two in my above descriptions. I'm not looking to talk about life insurance but to talk about car insurance.
Anyone who owns a car is the USA has to have some form of car insurance on it or a bond, rates and amounts vary by state.
Most people look at car insurance as a necessary evil. If you want to drive you have to have insurance on your car.
Now, what if we took the idea of investment life insurance and applied it to automobile insurance? What if the premiums you paid to your car insurance company were treated as an investment that you could draw against at a later date?
Do you see where I am going with this?
I think such a thing would lead to more responsible drivers and less fraud. If you knew that any claim you filed with the insurance company would result in a lowering of the cash value of your investment wouldn't you be more likely to drive more carefully? what would be the point of attempting insurance fraud if the only one you are cheating is yourself?
Because most people look at the thousands of dollars a year they "lose" by paying for car insurance they don't have any sympathy for the insurance company when they file a claim or hear about others trying to defraud the insurance company. When you turn it around and make the policy holder an investor and let them know that if they don't get into any accidents or file any claims there will be money left over for them to have at a later date you change the whole relationship.
Now, this is just an idea at this stage and I'm sure there are some problems that I have not even thought of. Think about it though. Car insurance where you got money back for being a good driver! Where can I sign up?
Car Crash Anatomy, part 1 by flickr member Dr. Keats used under Creative Commons License
Very intriguing post. I like the idea a lot! You know how whole life can start to pay part of the premiums? Whole auto insurance could do the same thing! Or, as you mentioned about drawing from the policy, you could borrow from it to get a new car. :)
It would be a great deal for people who are safe drivers. I’m surprised insurance companies don’t try something where good drivers get cash back when the policy term ends. Then again, those same insurance companies may know that there is more money to be made with term insurance.
I suppose the premiums for car insurance would need to be higher for a program like this, since the current premiums are already adjusted for your likelihood of getting in an accident (safe driving history, age, etc.) and don’t have excess for returning money to drivers. However, your idea raises an interesting point: would at least a percentage of drivers drive more safely because of this motivation? If so, that would be a cost savings that could be returned to safe drivers. This is a great “out of the box” idea.
That is very interesting to read! I never knew there were types of insurance out there! I am a new driver and this will come very useful for me! I will be making full permanent insurance for my car soon!
Yeah, the problem is that somebody is losing money somewhere, but it isn’t the consumer.
Really interesting ! I got something which i did know