The basics of car insurance
Car insurance protects against financial loss in the event of an accident. It is a
contract between the policyholder and the insurance company. The policyholder undertakes to pay premiums and the insurance company undertakes to cover losses as
defined in policy.
Vehicle insurance provides property, liability and health insurance:
Property insurance covers damage or theft of the car.
Liability insurance is covers the policyholder's legal liability of
others for personal injury or property damage.
Health insurance covers the costs of injury treatment, rehabilitation
and sometimes lost wages and funeral expenses.
Most states require drivers to have motor vehicle liability insurance before they can legally drive a car. (Liability insurance pays for the other driver's medical treatment, car repair and
other costs when the policyholder is at fault in a car accident.) All states have
laws that are set minimum amounts of the insurance or other financial security
drivers must pay for damage caused by their negligence behind the wheel if
an accident occurs. Most auto insurance policies for the six months to a year. Basic car
insurance consists of six different types of coverage, each of which is
price separately (see below).
1. Liability for Damage
This cover applies to injuries that the policyholder and family members named on the policy cause to someone else. These individuals are also covered when
drive foreign cars with a permit. Just like motorists in serious accidents
can be sued for large amounts, drivers may choose to buy more than the minimum required by the state to protect personal assets such as homes and savings.
2. Medical Payments are Personal Injury and Protection (PIP)
This coverage pays for the treatment of the injuries to driver or passengers
policyholder's car. At its pordest, PIP can be cover medical payments,
lost wages and replacement costs for services that someone normally performs
injured in a car accident. It can also cover funeral expenses.
3. Liability for damage to property
This coverage pays the policyholder for damages (or someone they are driving the car with
their permission) can cause on another's property. It usually means
damage to someone else's car, but also damage to street lights, telephone poles, fences, buildings or other structures hit by an accident.
4. Deduction
This coverage pays for damage to the policyholder's vehicle caused by a collision with another vehicle, an object, or as a result of a rollover. It also covers
damage caused by potholes. Collision insurance is generally sold with a deductible of $250 to $1,000 – the higher the deductible, the lower the premium. Even
if the policyholders are at fault for the accident, the accident cover will be paid out
is for the cost of repairing the car less the deductible. If the policyholder
not at fault, the insurance company can try to recover the amount they paid
from the other driver's insurance company, a process known as subrogation. If
if the company is successful, the deductible will also be returned to the policyholders.
5. Comprehensive
This cover compensates for loss due to theft or damage caused by something
other than a collision with another car or object such as fire, falling objects,
rockets, explosions, earthquakes, windstorms, hailstorms, floods, vandalism and riots,
or contact with an animals such as birds and deer. Comprehensive insurance is typically sold with deductibles of $100 to $300, although policyholders can opt for
higher deductibles as to the lower their premiums. Comprehensive insurance can reimburse the policyholder even in the event of a cracked or broken windshield.
Some of companies offer to separate glass coverage with or without a deductible.
States do not require the purchase of collision or comprehensive coverage, but
lenders may insist that borrowers carry them until the car loan is paid off. It can also be a
a requirement of some dealers if the car is on lease.
6. Uninsured and Under-insured Motorist Coverage
Uninsured motorist coverage will be paid by the policyholder, member
family or designated driver if one of them is hit by an uninsured or hit-and-run driver. Underinsured motorist coverage comes into play when at fault
The driver does not have sufficient insurance to pay the other driver's total loss. This coverage will also protect the policyholder who is hit as a pedestrian.
