Auto Insurance Companies and Their Investments
Have you ever wondered how an auto insurance company stays in business? At first glance, it seems like a no-brainer; obviously, they make money because they sell a product that people are legally required to purchase. But consider this: the average person pays around $900 a year for auto insurance. While that sounds like a large amount, it is nothing compared to how much a single car accident can cost.
For a minor car accident involving two vehicles, an insurance company could easily pay out double, triple, or many many times over your annual premium. If there are bodily injuries involved, tens of thousands of dollars or much much more could be paid out.
You’re hoping that you won’t have to actually use your auto insurance, but if you do, it will have easily paid for itself after just one accident. Not surprisingly, many auto insurers pay out more for claims each year than they bring in from premiums. So just how do they stay in business without charging sky-high premiums?
Investments in Insurance
Investments, that’s how. Your insurer makes money by taking most of the money that they take in and investing it in stocks and bonds. The better their investments perform, and a lower claims-to-premium ratio that is paid out, the more competitive the rates they’re able to charge their customers. In order for insurance companies to be profitable, insurers must earn more from premiums, which are invested across a range of asset classes, including stocks and corporate bonds, than what they pay out in claims.
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What is a Prescription Drug Deductible?
In the world of health insurance, “deductible” is a common word. It refers to an amount of money that you pay out of your pocket before the insurance company begins to pay. A prescription deductible is the portion you’d pay first, then after you’ve paid the deductible, you may only have to pay a co-pay when you pick up your medication.
If you are single, you would only have to meet your prescription deductible. If you have two or more people in your family, each member may have to meet their own prescription deductible which could be up to 2 deductibles in the family. A prescription deductible is different and separate from the medical deductible, unless otherwise stated. One deductible is for medical, ie: hospitalization, doctors, etc., and the other deductible is for filling your prescriptions.
Are Ambulance Rides Covered By Health Insurance?
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