What is the difference between life insurance and auto insurance risk?

UPDATED: Oct 19, 2010

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UPDATED: Oct 19, 2010Fact Checked

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Asked October 19, 2010

1 Answer

The primary difference between life insurance and auto insurance is that you are certain to die eventually, but it will only happen once. While the insured person is alive, life insurance policies continue to take in money against the eventual payout, building value towards the eventual time when the cash value of the policy is due. Simply put, there will only be one claim against a life insurance policy, and the amount it will cost is already set, two points a car insurance policy can't offer.

Car insurance, on the other hand, is not as certain. You could pay your auto insurance premiums for 20 years and never file a claim at all, or you may have an accident the day the policy is purchased. The risk is that there is no certain method for insurance companies to recoup the costs associated with a car insurance policy. Additionally, while a person only dies once, they have the potential to suffer many events that generate a car insurance claim. Vandalism, burglary, and accidents caused by you or other drivers are all examples of this risk, but so are such events as a deer running into the path of your car or a pebble being thrown up from the roadway and shattering your windshield.

Answered October 19, 2010 by Anonymous

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