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Auto Insurance
For most people, a house is the most expensive single, lifetime purchase. Of course, for those folks buying a new car every other year for 25 or 30 thousand dollars, the lifetime cost of car ownership can head toward half a million bucks. When you add in the mandated cost of auto insurance, and figure out the cost of upkeep and consumables, the lifetime cost of driving in good style would buy a few nice homes in most states, and be a decent down payment even in Boston or Los Angeles.
Auto insurance is, in fact, legally required in most states, at least liability coverage. Even in states where legal controls are minimal, lenders can require a certain level of comprehensive insurance while they are still the legal owners of the vehicle. You can lose your license in many places if you are caught driving without auto insurance, which is why many states establish government-private insurance pools to subsidize coverage for low-income motorists.
Not a luxury anymore
Without getting into the pros and cons of state mandated expenditures, it is clear that auto insurance is a necessity, not a luxury. With the cost of medical care and car repair, and possible loss of wages after an injury accident, it just makes good economic sense for people to insure themselves as much as possible within their respective budgets. The insurance markets in this country are somewhat skewed by government regulations, but it remains a highly competitive market where intense competition works to keep premiums down.
Even minimum-wage workers can afford car insurance today, and not only because of the state-sponsored pools. There are many private insurers who have learned to work within the various states’ constraints to find a profitable niche serving low-income drivers. Auto insurance remains a bargain for drivers who avoid tickets, not to mention accidents.
Rich, poor or in the middle, insurance is a major component of modern financial plans, for corporations as well as individuals. Although a fairly uncomplicated matter for a single young adult with a first job and a compact car, as people move through their careers and up (and sometimes down) the economic ladder, financial matters become as involved as any other area of a modern, upwardly mobile lifestyle.
The beginning of wisdom
Making decisions about auto insurance means calculating the appropriate deducible level, researching your car’s replacement cost, factoring in depreciation and considering other budget matters and financial obligations. Getting auto insurance is actually many young adults’ first experience with any kind of financial planning. Establishing good habits with insurance, learning how to make a budget and disciplining oneself to follow it are the first steps in a lifetime process of financial maturation.
Because life’s constant condition is change, you need to evaluate your insurance coverage on a nearly continuous basis. Changes in your economic situation, like career progress that begins rewarding you with fatter paychecks, is an often-overlooked reason for recalculating your insurance policies, including auto insurance. Your time is more valuable now, and income lost to injury (or, heaven forfend, death) adds up faster the more you make. Stay abreast of what your time and income are worth so you know what the replacement cost is, and insure yourself to that level.
Topics: Insurance |
