Car Insurance – where does my money go?


This is Dan. Dan wonders why his car insurance
costs as much as it does especially when his car isn’t worth a lot. But it’s about more than just Dan’s car. A lot of what Dan is paying for is the cost
of the damage it could do to other cars and other people. About a quarter goes towards potential injuries to others,
which could sometimes be life-changing. Then about a fifth goes towards possible damage
to other people’s property which usually means other drivers’ cars. Then a similar amount goes towards Dan’s own car which could mean repairs from
an accident or things like theft. The amount Dan pays towards all of these
potential claims is based on how many times people similar to Dan
have had to make a claim and how much each of these cost to put right. Next, we factor in what it costs to run our business. We also try to make a small profit where we can and as we’re the Co-op we invest
this back into the business to help improve the service we offer our
customers, members, and communities. Finally, before we can sell the insurance to Dan we add a Government tax called
Insurance Premium Tax. So, as you can see, there are actually
quite a few things that affect how much Dan pays for his insurance.

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