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 includes several definitions. These definitions determine the responsibilities and obligations of the policy holder, as a car owner, in case of damage to his car, the theft of his car, or an involvement in a car accident.
Here are some 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 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:
Auto insurance policies can be classified into multiple categories. Each exists to compensate for damage or loss sustained, and expenses incurred, in cases of property damage or injury. Several examples:
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 type of policy reimburses medical bills of the driver and his passenger regardless of whos at fault for causing the accident. It also protects against lost wages while the injured person cannot work.
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!
The following are specialized policies:
There are also specialized policies that suitable to some scenarios.
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 type of policy simply insures a policy holder in case his car is unavailable - he is given a replacement rental car for this period.
Even if you have the best and most expensive auto insurance policy, it is crucial you are familiar with all the fine print, as you don’t want to have unpleasant surprises when the time comes. For example, when a car is stolen, some insurance plans only cover 80% of the cost of a new car (this aims to prevent fraud by car owners who wish to get rid of their cars).
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