answersLogoWhite

0

Just like any other insurance the purpose is to transfer your risk of loss to the insurance company. The company is merely like a large co-op. It is almost impossible when you will have an accident and how much the damages will cost. However, when you have a large number of people, a company can make estimates on how many will have accidents and how much the damages will pay out. This is done by the law of large numbers. The company takes your unknown risk and replaces it with a know certainty. The know amount is the premiums you pay and the unknown risk of when you will have an accident and how much it might cost.

User Avatar

Wiki User

12y ago

Still curious? Ask our experts.

Chat with our AI personalities

JordanJordan
Looking for a career mentor? I've seen my fair share of shake-ups.
Chat with Jordan
ProfessorProfessor
I will give you the most educated answer.
Chat with Professor
EzraEzra
Faith is not about having all the answers, but learning to ask the right questions.
Chat with Ezra

Add your answer:

Earn +20 pts
Q: What is the purpose of purchasing auto insurance?
Write your answer...
Submit
Still have questions?
magnify glass
imp