When someone gets in a car accident they usually make a claim on their insurance policy. The service provider will pay out a certain amount of money to help repair or replace the vehicle and the driver can recover quickly. It seems strange that a business could make money while paying out for damage claims. So, how do insurance companies make money? It’s pretty simple really, most insurance providers collect much more money than they pay out. Car insurance is required by law, so no one can avoid paying for it. This means that the millions of people out on the road every day in America all have to pay an insurance provider.The thing is, most people don’t even make a claim on their insurance for fear of their rates going up. This means that insurance providers are basically being paid for nothing.
The thing is, most people don’t even make a claim on their insurance for fear of their rates going up. This means that insurance providers are basically being paid for nothing. Paying hundreds of dollars each month for several years can quickly add up to tens of thousands of dollars. When there’s a claim for damages the average payout is much lower than the total amount of money that’s been paid in for the policy coverage. Essentially, insurance providers are being paid hundreds of dollars per month because there’s a chance they might have to pay out for a claim. This is how auto insurance companies make money.
This still doesn’t completely explain how insurance companies make money. The value of the payments made to an insurance company isn’t enough to offset the cost of claims and other costs. If this isn’t enough to make a profit, how do insurance companies make money? They invest the money paid to them. The money is put into an investment pool. This pool allows insurance company owners to make money off of investments made with their customer’s money. Insurance companies are basically a way for bankers to collect money from customers and invest it where they can earn considerable profits.
A personal injury lawyer with over 10 years of experience, Ryan Malnar serves Colorado Springs with honesty & integrity.