Be a reckless driver and you'll pay for it

The concept of automobile insurance is simple: You pay the insurance company a premium. They invest your money, hope to earn something on it, and if you have an accident, they pay for the damage. Of course, the limits they will pay and the things they will pay for depend upon the specifics of your policy.

But what if your insurance premium was $5,000 to $10,000 a year? Could you afford it? Would you cry foul?

The sad truth is that insurance companies must charge premiums that are high enough to compensate them for the risk they take with you as a driver. If you've got a history of reckless driving, there's a higher chance that you'll cost them money down the road. So they're going to charge you more money in the form of your insurance premium.

It makes sense, doesn't it? Those who cost the insurance company more should pay more. And believe me, insurance companies have huge departments called underwriting that are paid to analyze data and determine how big of a risk you are. Then they tell you exactly how much you'll have to pay.