Why doesn’t car “Health” Insurance Exist?
The concept of ”health insurance” for cars – covering routine maintenance alongside repairs – remains largely absent from the insurance landscape, despite rising vehicle costs. Several factors contribute to this,according to experts in risk management adn insurance.
Insurance companies are hesitant to cover smaller losses, explained David Marlett, a professor of risk management at Appalachian State University. “They have to pay expenses like labor and documentation, which end up exceeding the cost of claims that are in the low hundreds,” he said.
Beyond the cost of processing small claims, insurers worry about adverse selection. “That’s when the people who would buy this coverage are the ones who are more than likely going to have maintenance problems,” Marlett explained. This means the risk pool would be disproportionately comprised of individuals with vehicles needing frequent repairs, making the coverage unsustainable.
Another concern is moral hazard, as defined by Etti Baranoff, an emeritus professor of insurance at Virginia Commonwealth University. “Moral hazard is when someone behaves less carefully as they know they’ll be insured,” baranoff said. “if somebody thought that eventually the insurance will pay, they’ll never do maintenance on the car.”
Baranoff also emphasized that insurance companies prioritize avoiding financial instability. Offering broader coverage could increase the risk of bankruptcy.
Even if insurers did offer maintenance coverage, premiums would likely increase significantly, Marlett noted. “And rates have gone up so much the last several years, I’m just not sure how much consumer appetite there would be, even if they found a way to offer this,” he said.
Currently, the average annual cost of car insurance in the U.S. is $2,671, a 12% increase from the previous year, according to Bankrate.
While thorough car “health” insurance isn’t readily available, some alternatives exist. Car manufacturers and third-party providers offer warranties that cover repairs for a specified period. Car repair insurance is also an option,though it typically doesn’t cover regular maintenance or repairs stemming from neglect.
The situation contrasts with health insurance, where preventative care is frequently enough covered. Paul Shafer, an associate professor of health law, policy and management at the Boston University School of Public Health, explained that this makes sense given the high cost of healthcare. He noted that preventative services like checkups, vaccines, and cancer screenings are often free or inexpensive to encourage utilization.
“Going to the doctor’s office for a basic visit and getting some X-rays, without insurance, can cost hundreds to thousands of dollars,” Shafer said. Research demonstrates that individuals often “avoid care when cost is a barrier” and struggle to prioritize essential healthcare services.
