How Insurance Works #AutoXplained



Insurance is pretty important and definitely needed in life for just about all occasions. Whether it’s life, home or auto, insurance is there for a reason just in case anything ever happens. Do you ever wonder what happens to all that money we pay into insurance? I know I do. Especially since I’ve been in my house for five years and have yet to put in a claim for anything, haven’t been in a car accident over the last ten years and am still alive. (Knocking on wood)



So where is all that money going that I pay monthly? The hubby and I often talk about this all the time and recently learned a few things that I didn’t know before and thought I’d share it with you in case you have the same type of questions and concerns that I do.

So we pay our life, home and auto insurance monthly, the money that we pay goes into a big pool so that when or if you ever call in a claim your insurance company can pull from that same pool and help pay towards what we’re putting a claim on. Since there are more of us contributing than there are claims being made there is always enough money to pay the claims that are being made.

We all know that once a claim is made our premiums tend to some times go up. This is calculated on the probability that you will make a claim again or at all. Those of us that are unlikely to make a claim and get money from the pool are more than likely to pay less than those that have a higher chance in making a claim.


  • Dropping your collision coverage on older vehicles.
  • Getting packaged deals. By insuring one or multiple cars, home and life insurance by the same insurance company you have a better chance at saving money.
  • Installing an alarm system in your vehicle.
  • Buying a car with a lower-cost insurance rate.

  • Where you live - living in an urban area may affect your premium.
  • What you use your car for - Those going back and forth to work daily verses those that use their vehicle to run errands.
  • Your driving record - An accident free driving record can help you qualify for competitive insurance rates.

Disclosure: Although this post has been generously sponsored by IBC, the opinions and language are all my own and in no way do they reflect The Insurance Bureau of Canada

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