Modern Day Auto Insurance: A Tell-All

It is essential to know the type of auto insurance one has and the level of coverage it offers. The fact remains that most people are completely ignorant of their insurance coverage until they have been involved in an accident. Getting the right auto insurance is one aspect that is easily overlooked because most people see it as a herculean task. However, you should know that auto insurance will come handy in an unexpected event such as theft or accident.
The basic function of the auto insurance is to provide the insured with a financial protection against physical damage or bodily injury which occurs as result of traffic collision. Auto insurance also offers the insured protection against liability that could arise from traffic collision. Furthermore, auto insurance offers financial protection against car theft and damage sustained from the events other than traffic collision such as collision with stationary objects. Since protecting your car and yourself is the major benefit of auto insurance, it advisable to get acquainted with the basic auto insurance terms and the different types of auto insurance coverage.

 

BASIC TERMS IN INSURANCE

  • COVERAGE: This refers to the amount of risk or liability covered by an individual or entity by the way of an insurance service.
  • PREMIUM: This refers to the amount of money that an individual or entity must pay for an insurance policy. It is considered as income by the insurance company and also represents a liability in that the insurance company must provide coverage for claims being made against the policy.
  • POLICY: This is also called the insurance policy. It is a contract between the insurer and the insured or policyholder which determines the claim which the insurer is legally required to pay.
  • CLAIM: A claim is a formal request to an insurance company asking for a payment based on the terms of the insurance policy.
  • DEDUCTIBLE: This refers to the amount of money that you pay out of your own pocket if you get involved in an accident. The higher your deductible, the lower your insurance bill.
  • EXCLUSION: This refers to the case for which an insurance company does not provide coverage.
  • RATE: This refers to the price of insurance expressed as a price per unit coverage

TYPES OF INSURANCE COVERAGE
There are three basic types of auto insurance coverage which are;

  • LIABILITY COVERAGE: The liability coverage is sometimes referred to as third-party coverage. This type of coverage pays for third party personal injury and death related claims as well as any damage to another person property that occurs as a result of your automobile accident. In some countries, the liability insurance is a basic prerequisite for driving. It is a very cheap insurance coverage but has shortcomings of its own. In case of you being involved in an accident, you will be responsible for the repair of your damaged car and treatment of any injury sustained by you.
  • COLLISION COVERAGE: This is the coverage that pays to fix your car after your involvement in an accident. It is mostly used when your car is purchased on loan or you have a loan against it because the car isn’t really your property. The major advantage of using the collision coverage is that it restores you back to where you were before any damage to your car. Collision coverage will also pay the value of your car if it is totalled in an accident.
  • COMPREHENSIVE COVERAGE: The comprehensive coverage is an extensive form of auto insurance that pays for damage other than collision incurred as a result of theft, vandalism, fire, water and other perils such as a tornado. This policy also covers the repair of your car and treatment of your injuries even when the accident occurs as a result of your fault. In addition, this policy covers the compensation of any third party involved in the accident.
    Unlike liability insurance coverage, the comprehensive and collision are quite expensive and is determined by the cash value of your car. Therefore you can say the higher the cash value of your car, the more expensive the insurance will be.

Additional coverage includes;

  • MEDICAL PAYMENT/ PERSONAL INJURY PROTECTION: This type of coverage pays the medical bills for the policyholder and passengers when a car is involved in an accident.
  • TOWING COVERAGE: This insurance covers the payment for the towing of the vehicle if it cannot be driven after an accident.
  • FULL TORT OR LIMITED TORT: this type of coverage allows you to reduce your insurance bill if you give up the right to sue in the event of an accident.
  • UNINSURED/ UNDERINSURED MOTORIST COVERAGE: this type of coverage provides for medical and property coverage if your vehicle is involved in an accident with an uninsured and underinsured motorist.
    ·RENTAL COVERAGE: This coverage option covers the cost of a rental car.
  • GAP: The gap insurance coverage pays the difference the blue book value of a vehicle and the amount of money still owed on a car. it is a suitable coverage if you are leasing a vehicle or purchasing a vehicle a low or no down payment.
    Different policies indicate the conditions under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

 

GENERAL EXCLUSIONS FOR MOST INSURANCE COVERAGE
These are only general exclusions while an insurer may have much more.

  • Tyre damage not resulting from an accident
  • Mechanical, structural, electronic or electronic failures or breakdowns
  • Loss resulting from not being able to use your car such as your income.
  • Depreciation, corrosion, or wear and tear
  • Loss or damages caused intentionally by you or by someone acting for you

 

FACTORS THAT AFFECT THE RATE OF YOUR AUTO INSURANCE

  • Deductible
  • Age
  • Gender
  • Demographic
  • Claims
  • Moving violation
  • Choice of vehicle
  • Payment plan
  • Multiple policies
  • Safety devices