Financial decisions people make generally depends on their wealth. People with sufficient money have many options to choose from. When you don’t have enough money you will have to cut corners and try to make until the end of the month. This is something that to a point shapes our lives.
Actually, there is a whole book explaining how the investment decisions must take your wealth into account. In “Rich Dad, Poor Dad†the author points out that rich people can take more risk when it comes to investment. Poorer people cannot handle the possible losses with their limited resources.
When it comes to auto insurance the opposite can be true. When you have many other places to spend the money you need to mind every cent. Motorists would want to make sure that they have just enough coverage for their cars so that they can keep premiums low.
It is true that car thieves, floods, fires and accidents will not care if you are poor or rich. If you don’t have sufficient protection you will not get the compensation you need. However, there are areas where vehicle insurance can provide more than basic protection of automobiles insured.
Protecting Assets with Auto Insurance Liabilities Coverage
Vehicle insurance policies have two essential functions. First function is to protect possible damages to the car insured. It can be stolen, lost in a fire, involve in an accident or get vandalized. If you have comprehensive and collision coverage your insurer would pay your damages. If your automobile is totaled after an accident you would be paid enough money to buy another similar one.
Second function is to pay for liabilities claims you may face. When you are deemed at fault in an accident you are liable for the injuries and damages you caused to third parties. Injured people may have to spend months in hospital and rehabilitation facilities. They cannot work either and you have to pay for loss of wages. When you have sufficient liabilities car insurance your insurer would pay these claims on your behalf.
When your coverage runs out because it wasn’t sufficient third parties or their legal representatives would come after you. If you don’t have assets to pay for those claims there is high chance they may even give up pursuing you in court. Legal proceedings are expensive and people wouldn’t start the process if they are not sure of getting paid at the end.
This situation is a bit more complicated for a wealthy driver. There are many court cases in the USA that lawyers ask substantial chunk of a rich man’s estate as compensation for the people he injured in a car crash. And there is a chance that they can win their cases and be entitled to more than half of the wealth accumulated over a life time.
What Is the Solution?
No doubt you will have to pay for the damages and injuries you caused when you have the means to do so. You can be smart about it by foreseeing such claims and make sure everyone is well protected, including you, third parties and your family.
When you have assets to protect your liabilities coverage should be sufficient to cover all the possible claims. With a little bit more premium you can buy more than sufficient liabilities cover and add legal defence costs as well into your policy, in case you are held negligent and personally sued.
This doesn’t mean that you don’t need to worry about possible third party claims when you have nothing to lose. It is highly recommended that people should buy comfortable level of liabilities coverage regardless of having assets or not .Most people would rather have a home to sell and pay the people who suffered serious injuries than have it on their conscious for the rest of their life.
However, if you have assets the losses would be real. When your liabilities policy is exhausted without covering all the claims made there will be one or two law firms ready to step in your pursuit if they know you have money. They wouldn’t hesitate about adding couple of million dollars for emotional stress on top of the costs of their injuries. This is the real difference you like it or not.
Wealth and Auto Insurance Savings
These days, auto insurance companies offer discounts based on your education, profession and wealth. They don’t tell that they give you discounts because you are rich. But they give discounts because you live in a nice neighborhood and you own your home. There are studies to show that a well off motorist who lives in nice part of the town with his family and homeowner gets much better quotes than a single mother who rents.
Effects of credit score cannot be ignored either. A rich person doesn’t become rich by accident. He knows how to handle his money and is likely to have a good credit score. Companies offer as much as 25% savings to people with good credit score.
These revelations may come across as discrimination and many states fought using credit score as a factor in premium calculations. However, the fact is that companies and the studies carried about by some states showed that people with better credit history are less likely to make claims.
How Is That Possible?
This brings us to choices motorists make when they have a legitimate claim on their vehicle insurance policies. Think about a situation where your teenage son/daughter crashes the car onto the garbage cans at home or scrape it on an object on the road. If you don’t have spare money to pay for the damages you have no option but to get your auto repaired with insurance money.
When you have money, you really don’t want to deal with loss adjusters, wait for your auto repairs to be approved and you have to negotiate which garage repairs it. Besides, you don’t get much money after deductibles when the claim is small. I can hear you say why wouldn’t anyone make a claim when they can?
The answer is simple. When insurance companies know that the teenager on the policy just caused an accident they will shoot up the premiums as much as twice. By having the money to manage your damages and small claims you keep your no claim bonus. This way you make sure that you keep your car insurance rates low for the next three years at least. An accident will remain in your records for at least three years and keep affecting your premiums.
Wealth and Other Types of Car Insurance Covers
It is very interesting the way auto insurers calculate premiums. Essentially, the more you buy the lower your rates get. For example, you pay $1,500 for a basic policy with liabilities, comprehensive and collision coverage. And you only pay about $1,800 for a fully comprehensive coverage that will offer you protection against uninsured motorists, legal defence, unlimited travels abroad, courtesy car when yours is in the repair shop after an accident and much more.
The problem is that when money is tight you automatically worry about adding those extras because of costs. But when you are not scared to ask extras you get many good covers thrown in for almost nothing. It is the mentality that helps you get covered better. You are not scared of asking for more and companies are happy to offer it to you, especially when you have more than one car, home insurance and other policies with the same company.
Furthermore, people with money are more likely to have good level of health insurance compared to people on a tight budget and not keeping a stable job. If you have good health insurance you may not need Personal Injury Protection. Otherwise, it would be highly advisable to buy this cover as well.
Conclusion
Thinking freely (without money restrains) allows motorists to arrange better automobile insurance coverage. Furthermore, it makes it easier for you to qualify for several discounts. You really don’t need to be super rich to take advantage of these benefits. Many people live in nice homes that they own and have good credit scores. Take advantage of every possible discount and don’t be scared to ask for more.
