Auto insurance is an important, and, in most states, legally required protection for drivers. Auto insurance applies to vehicles such as cars, trucks, and motorcycles, but also applies to boats. It is primarily designed to protect motorists, but also protects individuals, such as pedestrians, who may be injured by an auto, or property owner’s whose property is damaged by an auto.
There are many different types of auto insurance, so I would like to give you a general overview of the available options. Fortunately, the different types of auto insurance can be easily broken down by the level of coverage that they provide. The levels range from the highest possible to the bare minimum required by law.
First of all, there are two basic categories of auto insurance: collision insurance and comprehensive insurance. Collision insurance covers damage to the vehicle if it is damaged in an accident. Comprehensive coverage offers more protection because it applies to a wider range of situations including theft of the automobile.
It is easiest to start with the minimum level, which is know as liability coverage. Liability insurance pays for injuries or damages sustained by other vehicles and people involved in an accident that is caused by the policyholder. For example, if the motorist causes an accident in which both party’s vehicles are damaged, liability coverage pays only for the damage to the vehicle of the driver who was not at fault in the accident, and not to the driver who was at fault.
Liability is required by law in many states because it also covers personal injury protection to people injured in accidents. Thus, it ensures that any person injured in an auto accident, through no fault of their own, is covered by the insurance of the responsible party.
Personal injury protection (PIP) and medical payments (MP) are not included in liability. However, the next level of insurance, collision insurance does covers these two expenses.
Personal Injury Protection covers the policyholder for time and medical expenses required for the maintenance of a vehicle. This covers lost wages should a person need to bring a vehicle to a mechanic and must miss work as a result.
Insurance can also cover medical payments, which refers to the cost of treatment if the policyholder is injured in an accident and the cost of that treatment exceeds the limits of personal injury protection.
Collision coverage includes the liability of the driver to other parties, personal injury protection, and medical payments. It also covers damage to the policyholder’s own vehicle in the event that it is damaged in an accident, regardless of whether the insured is at fault in the accident or not. Therefore, even in a single car accident, the policy of the driver covers the damage that his or her car incurs. In a two car accident, all damage is covered by the person found to be at fault in the accident.
If the policyholder’s vehicle is damaged so badly in an accident that it must be replaced, collision insurance will pay for the value of the damaged vehicle towards the purchase of a new one. However, collision insurance does not cover the theft of the vehicle, damage from a fire, or damage due to weather, such as hail.
Comprehensive coverage offers a higher level of protection for the policyholder. It covers liability, PIP, MP, and damage to the vehicle if it is involved in an accident. Comprehensive coverage will also pay for a new vehicle if the vehicle of the policyholder is stolen or damaged in a fire.
Although both collision and comprehensive coverage can protect the policyholder from the cost of vehicle replacement, it is not perfect. This is due to the fact that the value of vehicles depreciates over time. These types of insurance will only pay for the value of a totaled (destroyed) vehicle, regardless of the cost of the vehicle when new.
However, there is a third type of insurance that can protect the policyholder from this kind of depreciation. GAP insurance protects the consumer from the depreciation in value of a vehicle.
It is obvious that auto insurance is complex, and it is important to understand all of the available options before making a choice. Different states have varying requirements, so it is important to ask question not only about the type of coverage you are purchasing, but about the requirements of your state, as well. Remember, accidents are called accidents because they are not deliberate, and always come as a surprise. Make sure that you have the appropriate coverage for you and your family in advance, to protect against unforeseen events, such as accidents.
By: Gena Woodard
Posts Tagged ‘Collision Insurance’
Common Auto Insurance Terms – Car Insurance Terms That You Need to Know
November 14th, 2009
Before you start shopping around for auto insurance, you should get a handle on some of the common car insurance terms. In all reality, the more you know about car insurance, the better chance you’ll have at finding the perfect coverage for your vehicle. Sure, you’d love to think that all companies would be upfront and honest with you about what you need and what you don’t need. But come on, what company doesn’t want to make some profit? This is why having the basic knowledge when it comes to car insurance can make all the difference when it comes to your auto coverage. Read on to learn some common auto insurance terms and then see how much money you can save!
Absolute Liability
This is liability without fault, also known as liability without regard to fault or strict liability. You may see this pop up when something considered contrary to public policy happens, even though the event wasn’t intentional.
Liability Insurance
In a nutshell, liability insurance is risk transference. Not only does give you protection against loss that arise from third parties, it covers your legal liability from injures to other people or their property.
Collision Insurance
This type of insurance is optional. Collision insurance provides coverage for the insured’s vehicle, subject to a deductible, that is involved in an accident. Basically, this covers you whether the accident was your fault or not.
Deductible
Also known as excess, this is the amount you agree to pay toward the total amount of an insured loss, whether it is per claim or per accident. Usually a fixed rate, the deductible must be paid before the policy benefits can be applied to a claim.
Uninsured and/or Underinsured Coverage
This type of insurance is great protection for you and your family if you happen to be hit by someone without insurance coverage. Having uninsured or underinsured coverage allows you and your family’s bodily injury to be paid for.
Comprehensive Coverage
Comprehensive insurance covers your vehicle in case of non-collision related incidents such as fire, theft, weather, impact with animals and vandalism.
Gap Insurance
This insurance is good for people who have just purchased a new vehicle. In a nutshell, new cars depreciate right after leaving the dealership lot. Gap insurance covers the difference between what an insurance company says your car’s worth and what you would actually owe on the vehicle.
Gap insurance usually only covers theft and accidents, but that can vary depending on the insurance policy. You can also purchase gap insurance from the dealership. However, you can expect to pay even higher premiums.
Property Damage Coverage
This covers any damage you may cause to another’s vehicle. Basically, if you cause it, you’re covered.
Claim
This is your request for reimbursement concerning a loss covered by your auto insurance policy.
Full Coverage
Actually, full coverage isn’t really what it sounds like. Technically, full coverage is a combination of collision and comprehensive coverage, meaning that your car’s physical damage is covered.
Secondary Driver
Also known as an occasional driver, this person is covered for driving the insured vehicle. However, this coverage does not mean that they’re the primary driver.
Shop Around To Find Cheap Auto Insurance
Familiarizing yourself with the above common car insurance terms will result in you making a wise decision when it comes to your auto coverage. Take your time and shop around before committing to a provider and you will be find the cheapest auto insurance company that will still meet your coverage needs.
The above terms are just the ones most frequently talked about or that affect the majority of drivers on the road. There are more common car insurance terms, but they are mainly state specific. The best way to find out what’s required in your state is by visiting your local DMV’s website.
By: James J. Robinson
Auto Insurance Definitions Simplified
November 8th, 2009
Auto insurance terms can be confusing, to say the least. Below are auto insurance definitions in layman’s terms.
Anti-Theft Device – Anything on your auto that reduces the chance that it will be stolen or that makes it easier to find if it is stolen. Examples include:
* Car alarms
* Keyless entry systems
* Starter disablers
* Vehicle identification number etchings
* Auto tracking systems
Bodily Injury Liability – The amount your insurance company will pay if you injure or kill someone else with your auto.
Collision Insurance – Coverage from your insurance company for repairing or replacing your auto if it collides with another vehicle or object.
Comprehensive Coverage – Coverage from your insurance company for repairing or replacing your auto if it is damaged by anything other than a collision or is overturned.
Claim – Any request for payment under the terms of your insurance policy.
Deductible – The amount you pay out of pocket before the insurance company begins to pay on a loss.
Good Student Discount – A discount that insurance companies give students who earn high grades in school.
Insurance Comparison Website – A website that allows you to quickly and easily get auto insurance quotes from multiple insurance companies (see link below).
Medical Payments – The amount your insurance company will pay for medical and funeral expenses caused by an auto accident.
Multi-car discount – A discount that insurance companies often give if you have more than one vehicle insured on the same policy.
Multi-policy discount – A discount that insurance companies often give if you have more than one policy with the same company.
Per Occurrence Limit – The maximum amount an insurance company will pay for all claims from a single incident.
Per Person Limit – The maximum amount an insurance company will pay for one person’s injuries caused by a single incident.
Property Damage Liability Insurance – The amount your insurance company will pay for damage you cause to someone else’s car or property.
Where to Get Cheap Auto Insurance Rates
By: Brian Stevens