As many of you are aware, car insurance is mandatory for all
drivers in Canada. The idea behind it is to spread the cost of a few incidents
across the general population of drivers, this way it's more affordable for all
of us. Today I'm going to introduce to you a philosophy that some of you may
find mindboggling, but in deeper thought actually makes sense!
Raise your deductible to $1,500 if not $2,000, and increase the
liability coverage to more than a $ million.
At first glance you may be tempted to question my sanity, but
let me explain. When the damage is less than $2,000, you're not going to claim
insurance anyways because A) your insurance premium will go up in the future
for the next 7 years because that's how long your record is kept, and B) you
have to pay deductible anyways, even if it's currently at $500 it is just not
worth it considering the higher premiums you are already paying for having a
lower deductible. The purpose of car insurance or any insurance is to cover
costs that you cannot possibly afford. Example, you were careless and ran over
Timmy as he ran across the road to pick up his basketball. Now you're on the
hook for millions of dollars because he was a star player in the NCAA and was
about to sign a multimillion dollar contract. Actually, a more realistic
example: you're now on the hook for millions of dollars because you ran over a
lawyer while you were driving in Downtown Toronto. The harsh reality is,
depending on how the court calculates the worth of the victim's life it could
be well over $1,000,000. Not to mention that is only one life that's calculated, what if you hit a car and there was a passenger? The standard policy is usually a million, but that's
not enough and guess what's going to happen when it isn't enough? You will
personally have to cover it, opening yourself to possible bankruptcy. Not sure
how the court will calculate it, but I have heard that a reasonable method
would be to calculate the present value of the victim's foreseeable earnings
for his lifetime in the event of life threatening disability or significant
brain damage (or death and compensation paid to their estate). Depending on how
much that person earns, it could be well over a million dollars. Although the
court will consider possible investment income that can decrease your liability
because of their consideration that a prudent person will invest their money
after receiving the lump sum, it probably won't make a huge difference relative
to the total before.
To sum it up, why bother paying a higher premium for a lower
deductible if you aren't going to claim insurance anyways for minor damages? Even if you aren't convinced that it could cost you more than $1,000,000 still, why pay the higher premium? You're basically wasting money, allow yourself a bigger liability coverage by
increasing your deductible and let the insurance work in your favour. Of
course, insurance providers wouldn't want you to know this, if anything they
want you to lower your deductibles so you can pay them a higher premium without
making any claims!
Anyways, have a wonderful evening folks. Drive safe and
don't hit anyone. Unlike certain video games involving grand theft auto, money
does not float above a dead body after you hit them....neither can you get away
by repainting your car.
-TT
