The difference is that (in theory at least), insurance will pay your full costs, regardless of how much you’ve already paid in. You can sign an auto insurance on one day, pay in 100$, then get into a 20k$ crash the next, and get the entire costs covered.
A retirement savings fund is capped by how much money you’ve put in it. You can never take out more money than you’ve put in (+interest/portfolio growth).
That’s kinda the whole point of insurance. If you want an insurance model like described in the post, well nothing is stopping you from opening an ETF or other savings fund, and dedicating it to auto payments. It’s not like you need a dedicated industry/service for that.
Exactly. Insurance is best thought of as similar to gambling, but functionally the opposite. It’s “I’m giving you $x per month knowing that I’m probably going to lose money on this exchange, but in return if I’m hit with y disaster that it would be very difficult to financially recover from then you pay for it”.
I get that some people are frustrated by it during financial squeezes, and with liability insurance it can be annoying as it’s mandatory. But as someone who’s gotten a renter’s insurance payout, the relief of “thank fuck I’m not out thousands of dollars while having to deal with this disaster” is immense
That’s exactly how it started! People would go to a major bookmaker like Lloyd’s coffee shop and place a bet against themselves. So you would bet that your ship would sink or your house would burn down or that you would suffer a crop failure. Then if the bad thing happened you would win the bet.
Of course, if the odds are close the bet would be very expensive, so you’d have to do monthly financing. But what if the catastrophic event happens before the bet is fully paid?
Somebody had the genius idea to pool everybody’s bet and run the odds.
I can’t fault people for being confused or frustrated when we also have insurance that’s intended to work as the primary means of payment.
Having our crap tastic excuse for a medical payment system be based in insurance, and then having another mandatory insurance system that’s somehow less helpful is reasonably frustrating.
That’s fair, and yeah I’m all in for replacing the health insurance system with single payer, but I find it difficult to picture a better system for car based risks without removing cars from the equation. The alternatives involve pushing some of the financial costs of driving onto people who create less of these costs. It’s why bad drivers have to get more expensive insurance and may struggle to get insured by the medium or low cost insurers.
Additionally home insurance is rapidly becoming more frustrating to people in many places thanks to climate change. The actuarial tables don’t lie, and seeing as destructive weather events are making many places more prone to disaster, insurers are going to find themselves taking the emotional blame, especially when many people refuse to believe that the climate has changed.
Not necessarily saying our system is wrong, just that the systems being so different can make people confused. :)
The alternatives involve pushing some of the financial costs of driving onto people who create less of these costs
I mean, our current model does that. All insurance does. You pool costs with the expectation that most people won’t need as much as they put in.
A significant amount of our costs are based on statistical, not individual, risks. A 23 year old male is going to be charged more for car insurance regardless of their driving record.
A better system might just be universal car insurance via vehicle registration. Bigger pool, easier to accommodate people who can’t afford adequate coverage, and it better ensures everyone’s cost is covered.
It’s also nice to not have a law forcing people to buy a product from a private company.
I think of insurance as a cost limitation device. In case of disaster it limits the potential costs to something manageable in exchange for a manageable monthly payment. As you acquire more expensive things (house, car, etc.) those potential costs expand significantly. With vehicles your car insurance also covers some medical expenses after an accident, as well as covering any other partie’s vehicles and medical costs should that be the direction the claim goes
I can pay a couple thousand dollars a year to insure my house but I definitely couldn’t have paid the 40k out of pocket to replace my roof, siding, a couple of doors and windows and repaint the garage after a recent hail storm. Every vehicle I’ve lost to nature’s chaos had a loan tied to it which would’ve been very difficult to both continue to pay back and repair/replace the vehicles. Insurance limited those costs
That’s a good model to think of it. Insurance originated as mutual aid and I’m very in support of not for profit insurance as a concept. Like, what you’re actually paying is the price of catastrophe times the odds of it in the given time plus administrative and profit costs. What that all means is that if you can’t afford it, then you really can’t afford to not have it should you need it.
It probably varies based on states but in CA you can put a deposit in with the DMV in lieu of getting insurance. The deposit would be used for any damages you are liable for. I don’t remember the amount but it made insurance seem like a better deal to me personally since the coverages went way beyond the deposit amount.
The requirement is “proof of financial responsibility” not “insurance” specifically. Every state allows you to establish a surety bond rather than insurance. If you’ve got $30k-$50k lying around doing nothing, you can let the state hold on to. So long as you don’t get sued for damages related to your driving, you get it back when you stop driving.
75k is a pittance compared to the damage you could do to another person’s property or life while driving. That’s the whole point of the legally mandated liability insurance–for most people getting in an accident that results in injury to the other party would be financially devastating. And even worse would be having someone hit you and put you through 250k of medical care with no ability to pay.
Thousands of people are injured every day in car accidents in the US and about 100 are killed, so its not some kind of unicorn situation.
If you want to argue about driving being a necessity to live and work, that’s a completely separate discussion from why liability insurance is necessary.
It’s not a completely separate discussion though. If driving is necessary to live and work, and you legally have to have insurance to drive, then I believe that to be a completely reasonable connection. I’m not saying we shouldn’t have a system in place to ensure people’s lives don’t get destroyed without proper compensation, I’m simply saying our current system is broken, and to try to justify it with saying you can spend what amounts to more than what the average person annually makes in the US is ridiculous.
Well that’s the thing. It’s about ensuring that there’s a legally predefined amount of money available to pay for damages you cause while driving. It’s not going to be cheap. The dmv holding it as cash is merely the alternative to insurance pooling everyone together, charging them according to risk and the cost of doing business, then paying it out whenever necessary.
The only real alternative would be forcing you to actively maintain that amount in free credit, which would probably be difficult and have a fee associated with the risk of inability to pay, especially as you’re not guaranteed to survive a crash you’re at fault in.
That’s why people get liability insurance instead,
The average new car is 50k, many cars are a lot more and medical expenses can be crazy. If you accidentally total a 100k sedan and the driver ends up with a broken bone you could be forced essentially into a life of indentured servitude with 50% of your wages garnished for life
What a shit take, “oh you can’t afford 75000 dollars, so that means you should instead also spend thousands of dollars every year for the rest of your life, and hey you are legally required to do so!”
I’d have fewer complains if driving weren’t a necessity to survive in this country, public transportation is few and far between if it even exists locally, and good luck getting any decent job without a car, or I guess you get minimum wage at the local gas station barely even being able to pay for rent. Oh, want to move? Guess what you’d need for that!
It’s a rigged system, and I despise seeing someone try to justify any part of it because “oh you could just pay $75000” ??? Fucking ridiculous.
Insurance is to cover the costs of the OTHER person if you cause an accident, so fucking yeah.
If you get in a car, that has the potential to cost someone else tens of thousands of dollars if you fuck up, you better fucking have some way in place to compensate that person, in case you do fuck up.
It’s your choice if you use insurance or capital for that, but it’s unfair to OTHER people on the road if they have to end up sitting up on (tens of) thosuands of dollars because you fucked up, and don’t have any way to compensate them.
And getting rid of insurance is not the solution to bad public transit access, and mandatory auto liability insurance isn’t a bad thing just because shit public transit forces most people into cars.
Like what alternative do you suggest ? No mandatory insurance, and crash victims just have to send up sitting on their own repair and medical costs, and that’s somehow better ?
I feel like ending up sitting on the costs of a crash you didn’t even cause is going to be more harmful to low income people than having to fork over liability insurance payments.
My suggestion is a government based insurance system that everyone puts a proportional amount into based on their wages, almost like taxes one might say, that goes towards a publicly available fund for people that have traumatic accidents/injuries.
The insurance you’re required by law to carry is liability imsurance that ensures you don’t ruin someone’s entire life with no ability to compensate them. If you own your car free and clear, its completely on you whether you want to insure your own property.
The difference is that (in theory at least), insurance will pay your full costs, regardless of how much you’ve already paid in. You can sign an auto insurance on one day, pay in 100$, then get into a 20k$ crash the next, and get the entire costs covered.
I’ve had basically this. In the decade or so I’ve been paying for my own insurance, I’ve had about 75k paid out in claims (hail storm totaled 2 cars and did heavy damage to the house, plus a third car totalled by a deer on a blind corner on a county highway)
Climate change is absolutely turning the entire insurance industry on its head given places like the southeast with frequent hurricanes and the southwest with frequent wildfires. And for everyone else the increasingly severe storms are raising the chances of a random incidence of chaos leading to a claim
The difference is that (in theory at least), insurance will pay your full costs, regardless of how much you’ve already paid in. You can sign an auto insurance on one day, pay in 100$, then get into a 20k$ crash the next, and get the entire costs covered.
A retirement savings fund is capped by how much money you’ve put in it. You can never take out more money than you’ve put in (+interest/portfolio growth).
That’s kinda the whole point of insurance. If you want an insurance model like described in the post, well nothing is stopping you from opening an ETF or other savings fund, and dedicating it to auto payments. It’s not like you need a dedicated industry/service for that.
Exactly. Insurance is best thought of as similar to gambling, but functionally the opposite. It’s “I’m giving you $x per month knowing that I’m probably going to lose money on this exchange, but in return if I’m hit with y disaster that it would be very difficult to financially recover from then you pay for it”.
I get that some people are frustrated by it during financial squeezes, and with liability insurance it can be annoying as it’s mandatory. But as someone who’s gotten a renter’s insurance payout, the relief of “thank fuck I’m not out thousands of dollars while having to deal with this disaster” is immense
That’s exactly how it started! People would go to a major bookmaker like Lloyd’s coffee shop and place a bet against themselves. So you would bet that your ship would sink or your house would burn down or that you would suffer a crop failure. Then if the bad thing happened you would win the bet.
Of course, if the odds are close the bet would be very expensive, so you’d have to do monthly financing. But what if the catastrophic event happens before the bet is fully paid?
Somebody had the genius idea to pool everybody’s bet and run the odds.
I can’t fault people for being confused or frustrated when we also have insurance that’s intended to work as the primary means of payment.
Having our crap tastic excuse for a medical payment system be based in insurance, and then having another mandatory insurance system that’s somehow less helpful is reasonably frustrating.
That’s fair, and yeah I’m all in for replacing the health insurance system with single payer, but I find it difficult to picture a better system for car based risks without removing cars from the equation. The alternatives involve pushing some of the financial costs of driving onto people who create less of these costs. It’s why bad drivers have to get more expensive insurance and may struggle to get insured by the medium or low cost insurers.
Additionally home insurance is rapidly becoming more frustrating to people in many places thanks to climate change. The actuarial tables don’t lie, and seeing as destructive weather events are making many places more prone to disaster, insurers are going to find themselves taking the emotional blame, especially when many people refuse to believe that the climate has changed.
Not necessarily saying our system is wrong, just that the systems being so different can make people confused. :)
I mean, our current model does that. All insurance does. You pool costs with the expectation that most people won’t need as much as they put in.
A significant amount of our costs are based on statistical, not individual, risks. A 23 year old male is going to be charged more for car insurance regardless of their driving record.
A better system might just be universal car insurance via vehicle registration. Bigger pool, easier to accommodate people who can’t afford adequate coverage, and it better ensures everyone’s cost is covered.
It’s also nice to not have a law forcing people to buy a product from a private company.
I think of insurance as a cost limitation device. In case of disaster it limits the potential costs to something manageable in exchange for a manageable monthly payment. As you acquire more expensive things (house, car, etc.) those potential costs expand significantly. With vehicles your car insurance also covers some medical expenses after an accident, as well as covering any other partie’s vehicles and medical costs should that be the direction the claim goes
I can pay a couple thousand dollars a year to insure my house but I definitely couldn’t have paid the 40k out of pocket to replace my roof, siding, a couple of doors and windows and repaint the garage after a recent hail storm. Every vehicle I’ve lost to nature’s chaos had a loan tied to it which would’ve been very difficult to both continue to pay back and repair/replace the vehicles. Insurance limited those costs
That’s a good model to think of it. Insurance originated as mutual aid and I’m very in support of not for profit insurance as a concept. Like, what you’re actually paying is the price of catastrophe times the odds of it in the given time plus administrative and profit costs. What that all means is that if you can’t afford it, then you really can’t afford to not have it should you need it.
You still have to pay for insurance even with the fund though. It’s required by law.
It probably varies based on states but in CA you can put a deposit in with the DMV in lieu of getting insurance. The deposit would be used for any damages you are liable for. I don’t remember the amount but it made insurance seem like a better deal to me personally since the coverages went way beyond the deposit amount.
The requirement is “proof of financial responsibility” not “insurance” specifically. Every state allows you to establish a surety bond rather than insurance. If you’ve got $30k-$50k lying around doing nothing, you can let the state hold on to. So long as you don’t get sued for damages related to your driving, you get it back when you stop driving.
I mean outside of the fact by law you have to have car insurance.
Depends. You can also deposit so much to the DMV instead for them to hold in place of insurance. In California it’s $75k.
Ah yes, $75,000, a totally reasonable amount for the average joe to just give away.
75k is a pittance compared to the damage you could do to another person’s property or life while driving. That’s the whole point of the legally mandated liability insurance–for most people getting in an accident that results in injury to the other party would be financially devastating. And even worse would be having someone hit you and put you through 250k of medical care with no ability to pay.
Thousands of people are injured every day in car accidents in the US and about 100 are killed, so its not some kind of unicorn situation.
If you want to argue about driving being a necessity to live and work, that’s a completely separate discussion from why liability insurance is necessary.
It’s not a completely separate discussion though. If driving is necessary to live and work, and you legally have to have insurance to drive, then I believe that to be a completely reasonable connection. I’m not saying we shouldn’t have a system in place to ensure people’s lives don’t get destroyed without proper compensation, I’m simply saying our current system is broken, and to try to justify it with saying you can spend what amounts to more than what the average person annually makes in the US is ridiculous.
Well that’s the thing. It’s about ensuring that there’s a legally predefined amount of money available to pay for damages you cause while driving. It’s not going to be cheap. The dmv holding it as cash is merely the alternative to insurance pooling everyone together, charging them according to risk and the cost of doing business, then paying it out whenever necessary.
The only real alternative would be forcing you to actively maintain that amount in free credit, which would probably be difficult and have a fee associated with the risk of inability to pay, especially as you’re not guaranteed to survive a crash you’re at fault in.
That’s why people get liability insurance instead,
The average new car is 50k, many cars are a lot more and medical expenses can be crazy. If you accidentally total a 100k sedan and the driver ends up with a broken bone you could be forced essentially into a life of indentured servitude with 50% of your wages garnished for life
If you can’t afford to give away 75k, then you can’t afford to not have auto insurance, so that’s kinda a mute point.
Just in case it’s not just a spelling error
It’s actually moot point not mute point
What a shit take, “oh you can’t afford 75000 dollars, so that means you should instead also spend thousands of dollars every year for the rest of your life, and hey you are legally required to do so!”
I’d have fewer complains if driving weren’t a necessity to survive in this country, public transportation is few and far between if it even exists locally, and good luck getting any decent job without a car, or I guess you get minimum wage at the local gas station barely even being able to pay for rent. Oh, want to move? Guess what you’d need for that!
It’s a rigged system, and I despise seeing someone try to justify any part of it because “oh you could just pay $75000” ??? Fucking ridiculous.
Insurance is to cover the costs of the OTHER person if you cause an accident, so fucking yeah.
If you get in a car, that has the potential to cost someone else tens of thousands of dollars if you fuck up, you better fucking have some way in place to compensate that person, in case you do fuck up.
It’s your choice if you use insurance or capital for that, but it’s unfair to OTHER people on the road if they have to end up sitting up on (tens of) thosuands of dollars because you fucked up, and don’t have any way to compensate them.
And getting rid of insurance is not the solution to bad public transit access, and mandatory auto liability insurance isn’t a bad thing just because shit public transit forces most people into cars.
Like what alternative do you suggest ? No mandatory insurance, and crash victims just have to send up sitting on their own repair and medical costs, and that’s somehow better ?
I feel like ending up sitting on the costs of a crash you didn’t even cause is going to be more harmful to low income people than having to fork over liability insurance payments.
My suggestion is a government based insurance system that everyone puts a proportional amount into based on their wages, almost like taxes one might say, that goes towards a publicly available fund for people that have traumatic accidents/injuries.
The insurance you’re required by law to carry is liability imsurance that ensures you don’t ruin someone’s entire life with no ability to compensate them. If you own your car free and clear, its completely on you whether you want to insure your own property.
I’ve had basically this. In the decade or so I’ve been paying for my own insurance, I’ve had about 75k paid out in claims (hail storm totaled 2 cars and did heavy damage to the house, plus a third car totalled by a deer on a blind corner on a county highway)
Climate change is absolutely turning the entire insurance industry on its head given places like the southeast with frequent hurricanes and the southwest with frequent wildfires. And for everyone else the increasingly severe storms are raising the chances of a random incidence of chaos leading to a claim