We all know car insurance is an expensive business – but where does our money go?
The money you pay on your motor insurance is not merely set aside in case you need it – instead it is put into one big pot. Here`s a breakdown of where the money from your premium goes:
50% to pay claims.
25% on legal and administrative costs.
25% for costs of running the company.
These numbers vary between insurers. Some are better than others at saving and on cutting their overheads.
Most of the money paid out on car insurance claims is paid on property damage.
Collision damage makes up about 50% of an insurance company`s total expenditure.
However, this is a relatively small amount when taken in context with medical expenses and personal injury claims. This is because the most an insurance company will ever pay out is the `fair market value` for your vehicle.
That is why collision and comprehensive cover costs companies a lot of money.
Insurance companies also spend a lot of money processing and settling claims.
Additionally, advertising, staff and commission payments further increase the costs of running an insurance company – the best way to avoid these costs is to buy your car insurance online.