How Insurance Companies “Save” Money

Low Premiums can Leave you and your loved ones exposed after an accident

Insurance companies make money by collecting premiums from you and investing those premiums in other interest-bearing ventures. So, if insurance companies make money partially by collecting premiums, why does their advertising seem to be based on charging you less? Well, think about it. If your premiums are going into interest-bearing ventures, the longer they can hold onto that money, the more money they make on the back end. Additionally, the less the insurance company must pay out in claims, the more money stays in interest-bearing ventures, making more money for the insurance company. Put simply: the longer an insurance company can hold onto its money and the less money they must pay out, the more money they are going to make.

Before we play with some numbers, look at my prior post regarding coverages you have on your auto policy.

What are your numbers? I’ve seen numbers like this:

Bodily Injury (or Liability)
Property Damage
Personal Injury Protection

$50K (or $15K, $25K, $75K or Health Ins. Primary)

Uninsured & Underinsured Motorists

$50K (or $15K, $25K, $75K)


Waived (or $25k)


Waived (or $25k)

If these are your numbers, or your numbers look similar, what does that mean? You are insuring everyone else, but ignoring your protection.

If you cause an accident, the injured person can recover up to $100K from your insurance company. You may have protected your assets.

What happens if someone else causes the accident and you or your children are injured? What if the person who caused the accident only has $15K in bodily injury coverage? What if you selected “Health Insurance Primary” on your Personal Injury Protection and your health insurance specifically excludes claims arising from an auto accident?

I’ll be honest, it’s a problem. Your insurance companies will fight over who is responsible for medical bills. You may have to pay a penalty. And if you or a loved one are seriously injured, your recovery will be capped at your Uninsured/Underinsured Motorist limit.


  • We recommend that you match your Bodily Injury coverage with your Uninsured/Underinsured motorist coverage. Your Property Damage and Collision/Comprehensive should match as well (unless you have an older car you wish to self-insure).


  • Always, always, always, select PIP (Personal Injury Protection) primary and the full $250K limit.

Going back to how I started this post, the insurance company wants nothing more than to hold onto its money. They entice you with a lower premium by reducing the PIP coverage and the UM/UIM coverage. Don’t fall for it. The savings are not enough to justify exposing you and your family to risk. The two solutions above are affordable and justified.

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Kenneth M. Harrell

Founder, Harrell Injury Law

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