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 determines the obligations and the responsibilities of a person who insures a car (a policy holder). This defines what happens what happens in case there is damage to his car, his car is stolen, or he is involved in a car accident (which may or may not be his fault).
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 term involves ones legal responsibility for bodily injuries and for property damage caused by him. This assures the policy holder that whatever happens, the insurance company will protect him - to some extent - from bodily or property damages he has caused.
Medical Coverage: this term defines how much money the insurance company would be willing to pay for injuries and necessary hospitalization that were sustained during an accident, as well as the costs of rehabilitation afterward. At times it may also include wages that were lost by the injured person while he is incapacitated.
The following are standard policies:
There are numerous types of auto insurance policies that exist to compensate for damage or loss sustained, and expenses incurred, by the car owner in cases of loss, injury or property damage. Here are several types of such policies:
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 offers more protection to the policy holder, and will cover the cost of a car that is burnt or is stolen. Note that it does not cover any damages incurred if involved in a car accident.
Collision: if this option is included, the policy holder is not financially responsible for repairing his car when it is involved in a car accident, even in the even he caused it. Pretty good option to have.
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 type of insurance offers the most protection to the policy holder, and covers everything from accidents, to auto theft, to fire damage, to act of god (vandalism, hurricane, flood). It can even cover the cost, at least partially, of medical expenses suffered during an accident and of items stolen from a car. Unsurprisingly, this is also the most expensive car insurance.
Specialized policies:
There are also specialized policies that suitable to some scenarios.
Classic car insurance: this policy is equivalent to a comprehensive car insurance in all ways, except that it covers a car older than 25 years. However, normally there are extra stipulations, such as the owner cannot drive more than a predefined number of miles every year.
Rental Reimbursement: in the event a policy holder's car is unavailable (i.e. it is in repairs as a result of an accident), this policy ensures that the car owner gets a replacement rental car for this period.
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 determines the obligations and the responsibilities of a person who insures a car (a policy holder). This defines what happens what happens in case there is damage to his car, his car is stolen, or he is involved in a car accident (which may or may not be his fault).
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 term involves ones legal responsibility for bodily injuries and for property damage caused by him. This assures the policy holder that whatever happens, the insurance company will protect him - to some extent - from bodily or property damages he has caused.
Medical Coverage: this term defines how much money the insurance company would be willing to pay for injuries and necessary hospitalization that were sustained during an accident, as well as the costs of rehabilitation afterward. At times it may also include wages that were lost by the injured person while he is incapacitated.
The following are standard policies:
There are numerous types of auto insurance policies that exist to compensate for damage or loss sustained, and expenses incurred, by the car owner in cases of loss, injury or property damage. Here are several types of such policies:
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 offers more protection to the policy holder, and will cover the cost of a car that is burnt or is stolen. Note that it does not cover any damages incurred if involved in a car accident.
Collision: if this option is included, the policy holder is not financially responsible for repairing his car when it is involved in a car accident, even in the even he caused it. Pretty good option to have.
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 type of insurance offers the most protection to the policy holder, and covers everything from accidents, to auto theft, to fire damage, to act of god (vandalism, hurricane, flood). It can even cover the cost, at least partially, of medical expenses suffered during an accident and of items stolen from a car. Unsurprisingly, this is also the most expensive car insurance.
Specialized policies:
There are also specialized policies that suitable to some scenarios.
Classic car insurance: this policy is equivalent to a comprehensive car insurance in all ways, except that it covers a car older than 25 years. However, normally there are extra stipulations, such as the owner cannot drive more than a predefined number of miles every year.
Rental Reimbursement: in the event a policy holder's car is unavailable (i.e. it is in repairs as a result of an accident), this policy ensures that the car owner gets a replacement rental car for this period.
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 procedures and may save you money, visit his site, the Auto Insurance Information Highway.
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