%%bloglink%%
This reasoning made no sense to me.
According to the Property Casualty Insurers Association of America, a trade association that analyzes insurance data, the average driver will file an auto related insurance claim once every 17.9 years.
Using the economist’s reasoning, if I got into an accident today I could drive recklessly for the next 17 years because I would not be “due” for a crash until then.
What if its been 18 years since my last accident, should I never drive again?
What is the average crash survival rate?
According to the the National Highway Traffic Safety Administration, in 2009 there were 10.8 million motor vehicle related crashes resulting in 30,800 fatalities (latest data available).
That is a 99.71% crash survival rate.
If you take away the fatalities due to speeding (10,600), the fatalities due to alcohol or other drugs (11,400) and the fatalities due to driver distracted by something in the car (5,500) the crash survival rate increases to 99.97%!
Crashes happen all the time
Just in the last two years, we have seen several major market crashes such as: U.S. stocks during Q3 2011 when the debt ceiling crisis hit a boiling point, U.S. bonds of all types during June of this year, municipal bonds late 2010 and international stocks and bonds early 2010 when Portugal, Italy, Greece and Spain were in the news.
Each of these crashes caused temporary damage to portions of my account yet my portfolio crash survival rate remains at 100% because I maintain a diversified portfolio (no speeding here), I don’t panic (I think drinking wine helps with this) and I rebalance regularly (no distractions here).
How are you helping to improve your portfolio crash survival rate?
