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.
The following are important definitions:
Property Coverage: this term generally covers the damage made to a policy holders car by whatever means, and also includes the theft of his car. Clearly this is a necessity when it comes to insuring ones car, and every car owner should be insured against property damage.
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 term applies to the amount of money paid for the hospitalization and treatment of injuries incurred during an accident, as well as the costs of rehabilitation, and wages lost by the injured person during this time of incapacitation.
The next few items are standard policies:
There is a great variety of auto insurance policies which exist for the purpose of indemnifying the car owner in case of loss, injury or damage. These also can be classified into several types.
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 covers the cost of a car that is either stolen or burnt, but it does not cover any other damages. For example, if involved in a car accident, based on this option alone, the insurance company is not financially responsible.
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 best type of auto insurance and the most expensive one as well. It offers virtually all protections to the policy holder ranging from accidents, medical bills (at least partially), fire damage, theft, and even natural disasters ("acts of god"). 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: this policy targets owners of antique cars (cars that are older than 25 years), and is equivalent to a comprehensive car insurance. There are usually extra conditions in the policy, such as a limit on the number of miles the car owner may drive in a year's time.
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.
Regardless of the policy a car owner has, it is important for him to be familiar with his policy. Some auto insurance providers do not reimburse 100% of the value of a stolen or damaged car, but rather return only 80%, with the rationale being that this prevents frauds - accidents or thefts initiated by the owner of a car who simply dont want them anymore.
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.
The following are important definitions:
Property Coverage: this term generally covers the damage made to a policy holders car by whatever means, and also includes the theft of his car. Clearly this is a necessity when it comes to insuring ones car, and every car owner should be insured against property damage.
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 term applies to the amount of money paid for the hospitalization and treatment of injuries incurred during an accident, as well as the costs of rehabilitation, and wages lost by the injured person during this time of incapacitation.
The next few items are standard policies:
There is a great variety of auto insurance policies which exist for the purpose of indemnifying the car owner in case of loss, injury or damage. These also can be classified into several types.
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 covers the cost of a car that is either stolen or burnt, but it does not cover any other damages. For example, if involved in a car accident, based on this option alone, the insurance company is not financially responsible.
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 best type of auto insurance and the most expensive one as well. It offers virtually all protections to the policy holder ranging from accidents, medical bills (at least partially), fire damage, theft, and even natural disasters ("acts of god"). 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: this policy targets owners of antique cars (cars that are older than 25 years), and is equivalent to a comprehensive car insurance. There are usually extra conditions in the policy, such as a limit on the number of miles the car owner may drive in a year's time.
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.
Regardless of the policy a car owner has, it is important for him to be familiar with his policy. Some auto insurance providers do not reimburse 100% of the value of a stolen or damaged car, but rather return only 80%, with the rationale being that this prevents frauds - accidents or thefts initiated by the owner of a car who simply dont want them anymore.
About the Author:
Theodore Hoffstrader has been struggling for years with Auto Insurance issues, and has learned a lot from his experiences. In this article he discussed a couple Auto Insurance Basics. To view more articles that will help you better comprehend Auto Insurance procedures and may save you money, visit his site, the Auto Insurance Information Highway.
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