According to the Department of Motor Vehicles (DMV), US law requires every car owner in the country to covered by a some type of auto insurance. This law exists for two reasons: first, to protect the car owner from damages he or his car suffer in an accident, and second, to protect other people from damages that he may cause and may be his fault.
Auto Insurance Coverage defines the responsibilities and obligations of the policy holder (the person who insures his car) in case his car is damaged or stolen, or he is involved in a car accident.
Definitions:
Property Coverage: this defines the coverage for which the insurance company is responsible for when the policy owner's car is damaged (through accidents or vandalism) or when it is stolen. Clearly, a very important option.
Liability Coverage: this defines the coverage the insurance company provides for the policy holder when he is involved an accident and causes bodily or property damage to someone else. By having this option, the policy holder is protected, as defined by his policy, from the financial costs.
Medical Coverage: this defines the amount of coverage the insurance provider is willing to provide for the treatment of injuries and hospitalization sustained during an accident, as well as the costs of rehabilitation. In some cases, it also covers the wages lost by the injured person while he cannot not work.
The next few items are standard policies:
Auto insurance policies can be classified into multiple categories. Each exists to compensate for damage or loss sustained, and expenses incurred, in cases of property damage or injury. Several examples:
Third Party: this is the simplest and cheapest policy, and the bare minimum, a car owner must possess if he owns a car. It financially protects an insured individual when he causes damage to someone or their property.
Fire and Theft: this type of policy protects a car owner from situations where his car is either burnt or stolen, but it does not protect him from other situations, such as property damage or medical injuries.
Collision: this type of policy covers the cost of repairs to a car when the policy holder is liable for the accident. Basically, if you cause the accident, you still get paid for repairs if covered by this type of insurance.
Personal Injury Protection (PIP) or Medical Payments (MedPay): this policy protects the driver and any passengers that were in his car during a car accident, by reimbursing them for medical bills and lost wages. Note that the question who caused the accident is irrelevant for this policy.
Comprehensive: this is the most expensive car insurance, and unsurprisingly, the best one as well. It covers the policy holder from accidents, auto theft, medical bills resulting from bodily injures (at least partially), fire damage, and even "acts of god" (such natural disasters). On top of that, it even partially covers the cost of items stolen from a car.
Specialized policies:
The following are specialized policies that only some people may be interested in.
Classic car insurance: covers a car that is older than 25 years. In principle it is equivalent to a standard comprehensive car insurance, however, it may have a limitation on the number of miles the owner can drive per year.
Rental Reimbursement: this policy ensures a policy holder that he'll always have a car to drive in. If his car is damaged (no matter which way), he is entitled to receive a replacement rental car until it is fixed.
No matter which policy you may have, it is essential that you are intimately familiar with its details as this could have significant financial repercussions when the time comes. For instance, some auto insurance plans only reimburse 80% of the value of a stolen car - the reason being, to avoid fraud (car owners from staging theft of their own cars).
Auto Insurance Coverage defines the responsibilities and obligations of the policy holder (the person who insures his car) in case his car is damaged or stolen, or he is involved in a car accident.
Definitions:
Property Coverage: this defines the coverage for which the insurance company is responsible for when the policy owner's car is damaged (through accidents or vandalism) or when it is stolen. Clearly, a very important option.
Liability Coverage: this defines the coverage the insurance company provides for the policy holder when he is involved an accident and causes bodily or property damage to someone else. By having this option, the policy holder is protected, as defined by his policy, from the financial costs.
Medical Coverage: this defines the amount of coverage the insurance provider is willing to provide for the treatment of injuries and hospitalization sustained during an accident, as well as the costs of rehabilitation. In some cases, it also covers the wages lost by the injured person while he cannot not work.
The next few items are standard policies:
Auto insurance policies can be classified into multiple categories. Each exists to compensate for damage or loss sustained, and expenses incurred, in cases of property damage or injury. Several examples:
Third Party: this is the simplest and cheapest policy, and the bare minimum, a car owner must possess if he owns a car. It financially protects an insured individual when he causes damage to someone or their property.
Fire and Theft: this type of policy protects a car owner from situations where his car is either burnt or stolen, but it does not protect him from other situations, such as property damage or medical injuries.
Collision: this type of policy covers the cost of repairs to a car when the policy holder is liable for the accident. Basically, if you cause the accident, you still get paid for repairs if covered by this type of insurance.
Personal Injury Protection (PIP) or Medical Payments (MedPay): this policy protects the driver and any passengers that were in his car during a car accident, by reimbursing them for medical bills and lost wages. Note that the question who caused the accident is irrelevant for this policy.
Comprehensive: this is the most expensive car insurance, and unsurprisingly, the best one as well. It covers the policy holder from accidents, auto theft, medical bills resulting from bodily injures (at least partially), fire damage, and even "acts of god" (such natural disasters). On top of that, it even partially covers the cost of items stolen from a car.
Specialized policies:
The following are specialized policies that only some people may be interested in.
Classic car insurance: covers a car that is older than 25 years. In principle it is equivalent to a standard comprehensive car insurance, however, it may have a limitation on the number of miles the owner can drive per year.
Rental Reimbursement: this policy ensures a policy holder that he'll always have a car to drive in. If his car is damaged (no matter which way), he is entitled to receive a replacement rental car until it is fixed.
No matter which policy you may have, it is essential that you are intimately familiar with its details as this could have significant financial repercussions when the time comes. For instance, some auto insurance plans only reimburse 80% of the value of a stolen car - the reason being, to avoid fraud (car owners from staging theft of their own cars).
About the Author:
Theodore Hoffstrader has been wrestling for years with Auto Insurance matters, and has learned a lot from his experiences. In this article he discussed a couple Auto Insurance Basics. To read more articles that will help you better comprehend Auto Insurance and possibly save you money, visit his site, the Auto Insurance Information Highway.
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