Most people understand the basic concept of a car insurance plan: people pay a monthly premium based on their original auto insurance quote, then drivers hope nothing bad happens. If it does, the plan is there to deal with the costs of a car accident, which include both damages to the vehicle as well as injuries and related medical expenses. However, a few months after the accident, something else happens: the cost of insurance goes up, sometimes significantly. 

Why does this happen?

When people get car insurance, they are put into a pool with a good number of other people with the same kind of plan. The goal is to make sure there is enough money coming in through the pool members' premiums to cover anyone that has an accident. In most cases, a majority of those signed up don’t have accidents, so the pool stays solvent and has enough cash to pay claims. The occasional accident that does occur can be covered easily.

However, the insurance agency needs pay all of their operating costs, like employee salaries and benefits, and maintain the pool of money dedicated to paying claims. When an accident occurs, the responsible driver is viewed as a higher risk to the insurance pool. To offset this, the insurer then charges the driver(s) involved a higher premium. 

Car insurance is a necessity for every driver, and understanding how risk is managed is important. Consumers aware of how insurance works can then use their knowledge to their advantage when comparing auto quotes and get the best coverage possible.

When you’re ready to shop for auto insurance, call Consolidated Agency of Rochester, NY, at (585) 467-4110. You can also visit their website to find out more about other offerings, like commercial and home insurance.