Where Does Your Auto Insurance Dollar Go?

You pay your auto insurance. You have the right amount of coverage. So where does all that money go?

The exact cost you will have to pay for your insurance depends on several factors. One factor is what car you drive.

For example, the Porsche 911 tops the list as the most expensive car to insure. A person could pay $2,943.78 a year . . . and that’s with a clean driving record. The Dodge Caliber is the least expensive car to insure.

Another factor that affects your insurance is where you live. Washington DC has the most expensive insurance cost–$1,140 a year. North Dakota, on the other hand, is home of the least expensive insurance, at a cost of $512 a year.

So how do those figures break down? How much of the money that you pay to the insurance companies goes to protecting you?

A Breakdown of Your Auto Insurance Dollar

The insurance company not only has to be sure they are able to pay the damages covered under policies, but they also should make sure they can cover the cost of doing business . . . plus a little profit.

It should be no surprise, then, that the largest portion of your dollar goes to payments for damages. That is what we pay the insurance company for, after all.

The second largest chunk out of your dollar goes to profit–the insurance companies have to make money too, you know.

In the middle are payments to those injured. Next are lawyer’s fee, and the smallest portion of your dollar goes to operating the company.

Cost of Living Vs Auto Insurance Pricing

Auto insurance costs can seem to get out of control sometimes. The cost of living has been rising over the years, but not as fast as insurance pricing.

Given that the base is 1982 being 100, in 2000 the cost of living index was just about 170 and the auto insurance index was a little less than 160.

Between 2001 and 2002 both those numbers rose, but the cost of living index rose less than the auto insurance index. During this time, they were both about the same.

That didn’t last long, however. By 2002, the insurance pricing index was about 10 points above the cost of living. By 2009, the insurance index was 350 while the cost of living was about 315.

Once and For All, Who is the Better Driver?

With all this talk of rising insurance pricing, one has to wonder who the better driver is. After all, men have to pay a higher premium than women. Is it gender bias or is there a method behind the insurance companies’ madness?

The male to female ratio for violations given because of reckless driving is about 3.5 to 1. Similarly, men outnumber women in the number of DUIs more than 3 to 1.

Men also get more speeding violations than women . . . a ratio of just under 2 to 1. Men also get more violations for failing to yield at a ratio of about 1.5 to 1.

In fatal crashes the annual number of male victims also outnumbers the number of women who die: more than 45,000 men to about 15,000 women. Less than 1.5 million women per year are injured in a crash while the number is closer to 2 million when it comes to men.

With property damage, the men again outshine the women. They cause a little less than 4.5 million incidences while women cause 3 million.

The money you spend on auto insurance takes care of several factors. A large chunk of it does go to protecting you, but some of it also has to cover the cost of business.

So the next time your auto insurance bill comes, take a moment to think of where your money is going. It may just change your perspective on that particular payment.