column about car insurance 2/2

[HaraKiriBlade]

Continuing from the previous post.

And again, the link to the whole column:
http://torontosun.canoe.ca/News/Colu...67872-sun.html

"Hey buddy, did she try to upgrade you to the killer deductible?" So good at changing the subject.
"YES! How did you know? She said if I was concerned about my high car insurance premiums, I should consider bumping up my deductible way up!"
"So I pay for all the petty vandalism! Slashed tires! Broken windshields!"

Question C1: What is deductible in this sentence? My guess is that it's the portion of you pay to the insurance company that is tax deductible.

Question C2: Assuming my guess is somewhat correct, I don't understand much about what they say. I don't know what she meant by the killer deductible. I don't know how insurance premiums work. Hmm... complicated stuff.

"The deductible on my ride is now $25,000."
"Basically, I pay for my car's injury, death or disappearance. But my agent only wants $1,400 for a little pink proof of insurance slip. It's a great deal."
"Wrong!" Gord yells. "Do you think insurance companies invented 'bad' postal codes to eat up the rebate they were supposed to give us? It's a rip-off, Dunf!"
Impossible. What planet does he live on?

D1: I don't know what the columnist is referring to by saying "It's a great deal." It's not like he's only paying $1,400 instead of $25,000. Or... am I wrong on this again?

D2: The columnist (Gary Dunford, thus Dunf) ends his column with this one comment. "Impossible. What planet does he live on?" Is he saying his friend he was talking to is... naive? out of touch? or is he saying something else?

Thank you very much... and if anyone would read the whole column and tell me what it's really about I'd really appreciate that.

[mykwyner]

Dear HKB, You sure ask some tough questions!

Well, here goes:

In the US the law requires that all cars and drivers must have insurance. There are two types of insurance, collision insurance pays for the repair of your own car, and liability insurance pays for the repairs and medical bills of the other car or cars involved in the accident. The law only requires you to have liability insurance, but almost everyone has some amount of collision insurance also. The deductible is the part of the (collision) insurance claim that the insured person must pay from his own pocket. Here is an example:

You own a 2002 toyota that is worth $10,000. You have collision insurance with a $100 deductible. If your car receives damage which the insurance company judges will cost $500 to repair, they will give you $400 (your $500 loss minus the $100 deductible). If the car were totally destroyed the insurance company would pay you $9,900 (the value of the car less your deductible).The insurance company may charge you $400 per year for this insurance (on top of whatever they are charging you for liability insurance). If you wish to pay less for insurance you can choose a higher deductible, $200, $500, $1,000 or more. If you had a $5,000 deductible you might have to pay only $200 per year. Because you are assuming more of the risk yourself, the company will charge you less for the insurance.

If the deductible on your ride (car) is $25,000 that means you will pay the first $25,000 in repairs to your car out of your own pocket. Essentially, you are only buying the liability insurance that the law requires (little pink slip). $1,400 per year would be cheap for some people. A "killer deductible" would be one that would kill you if you had a claim (like the above-mentioned $25,000).

Yes, you correctly surmised what the "other planet" remark is about.

Mike

[HaraKiriBlade]

Great explanation!! very informative, too! I now know the essentials about car insurance. I had no idea before. Thank you very much mykwyner. (Or... Mike?)

One thing that still puzzles me though is that why the columnist thought his friend, Gord, was naive.

"Wrong!" Gord yells. "Do you think insurance companies invented 'bad' postal codes to eat up the rebate they were supposed to give us? It's a rip-off, Dunf!"

What rebate is he talking about? based on your explanation about I'm thinking it's what insurance companies pay for. (anything other than deductible)
And maybe the columnist 'Dunf' made such comment because his friend Gord didn't fully grasp the relationship between what insurance companies pay for and the deductible? because he named what insurance companies pay for as 'rebate'? (BTW, it's kind of getting on my nerves that I have to say 'what insurance companies pay for' repeatedly. Do you know simpler words to replace it?)

I now know what the columnist is getting at by saying having high deductible and paying little for the actual insurance is a great deal, but I have no idea what his friend Gord is saying. Could you clarify this for me? Thank you very much again.

[Marylin]

Question C1: What is deductible ? ... I don't know how insurance premiums work. Hmm... complicated stuff.


How about reading up on some auto insurance stuff, HB?

http://www.esurance.com/FAQ/auto_ins...efinitions.asp
http://www.carinsurance.com/CoverageDefinitions.aspx
http://www.carinsurance.com/CoverageDefinitions.aspx