How auto insurance works

 

This article may help you if you're planning to purchase a car or already a car owner but with little knowledge on how auto insurance works.  You have may have heard key words in the auto insurance world such as deductible, premium and so on.  But not many know how to differentiate the different aspects of an auto insurance policy and which one is most suited for you.

Almost all countries require that you have at least a car insurance policy, thus making it a good idea to know what the kind of policy you should have according to the law and what other aspects does the policy cover in case of an accident or an even of theft.

Prior to purchasing an auto insurance, you should consider the factors such as which car do you own, your driving record and how much you’re willing to invest for an auto insurance policy. The basic of auto insurance will make you more aware of the type of policy you need in case of an accident.

We will be covering the basics and discuss about the auto insurance coverage for possible insurance needs.  We will be also analyzing the different prices of auto insurance, and what you need to know the bring the costs down and understand your policy accordingly.

Basically every driver who owns a card needs car insurance, which is a must in most countries according to the law.  When you pay for auto insurance, what you really are paying for is called a policy.  Now your policy will be based on different factors such as which vehicle do you drive, and what type of auto insurance do you want.  Most  of the auto insurance these days comes in packages.

The main factors to consider would be liability, collision, comprehensive, medical coverage, uninsured motorist, underinsured motorist and rental reimbursement.  We will now breakdown these main factors and explain each one of them accordingly.

Liability – This insurance policy pays for the accidental bodily injury and property damages to others.  Injury damages include medical bills, pain and covering your wages if lost.  Property damages covers damaged property and automobiles.  This coverage pays for your law fees and court expenses.  Laws depending on the country determines how much liability coverage you must own, but you can always get more than what is necessary.

Collision -  This insurance policy pays for the damages to your vehicle caused by collision with another vehicle or object.

Comprehensive – This insurance policy pays for the damage or loss to the insured vehicle that doesn’t happen in an auto accident.  The types of damages this insurance policy pays for includes natural causes such as fire, wind, hail, flood, vandalism or theft.

Medical – This insurance policy pays for your medical bills regardless of who’s fault when the expenses are caused by an auto accident.

PIP – Personal injury protection is compulsory in some countries.  This insurance policy pays for the insured driver, regardless of fault, for treatment due to an auto accident.

Uninsured Motorist – This insurance policy pays for car’s damages when an accident is caused by a driver who doesn’t have liability insurance.

Underinsured Motorist – Pays your car’s damages when an auto accident is caused by someone who has insufficient liability insurance.

Rental Reimbursement -  This insurance policy will for a rental car if your car is damaged and is covered by your policy.  Often the insurance company provides a motor vehicle but in case one isn’t available, an allowance is provided for the rental car.

Most insurance policies combine a number of these types of policies.  Before choosing the right one for you it would be best to check the laws in your country first.  You will then be able to determine which type of auto insurance to start with or would need for your vehicle.  It’s always good to check because most coverage isn’t required by your country and extra coverage would mean higher costs.