Auto Insurance – Understanding the Different Types
Auto insurance is a legally binding contract between you and your insurance provider that cover you against potential financial loss in case of a vehicle accident or even theft. In return for your paying a certain premium, the insurer agrees to cover your potential losses as set out in your coverage. There are various types of auto insurance coverage offered in the market. You can opt for third party coverage, which covers the other driver or his/her car/auto in case of accident. Comprehensive coverage is the most popular one and provides coverage for damage not just to your car or vehicle, but also to any property on which you may park. Your vehicle can be covered even in case of theft or fire.
The basic concept of auto insurance coverage is quite simple. There are minimum coverage amounts which must be paid by the insured to the insurer. These are the limits which the insurer will accept for paying possible claims. However, there are circumstances in which you may need to exceed these limits.
Collision and comprehensive coverage to pay damages to an insured vehicle in case of collision with another vehicle, person or object. Bodily injury liability covers the costs of treating injuries sustained to a third party caused by your fault. This type of liability insurance will pay the expenses for treating injuries to anybody who is injured on the property of the insured. In case of fire, the liability coverage pays the cost of heating the building if it burns down to the ground.
The fault insurance coverage pays the expenses for repairs to your vehicle in case it is damaged due to unexpected reasons. If it is your fault, you are liable to pay all the necessary repairs to the car or vehicle. If the other person’s fault, the insurer pays all the necessary repairs. The third party damages liability insurance coverage only pays the repair costs, it does not pay any other expenses.
If you’re involved in an accident in another person’s vehicle, then you will need the uninsured/underinsured motorist insurance coverage. It covers the expenses for treating injuries to you or persons in the other vehicle if the accident was not your fault. You’re required to have this coverage in most states as a part of the minimum requirement of auto insurance. It pays the expenses for treating injuries if somebody is hurt in an accident that was your fault.
Collision coverage is very important for those who own cars and vehicles because this type of insurance will cover the repair costs if you meet with an accident in someone else’s vehicle. If you meet with an accident in someone else’s vehicle, then your lender may require that you take full responsibility for the repairs or replacement of the vehicle. If you have insufficient funds to make the payments, then your lender may choose to repossess your vehicle. So, it is important that you purchase collision insurance.
Another major thing that you should know is that your lender may also require you to have uninsured motorist insurance coverage or PIP. This type of insurance coverage is required for people who are considered “high risk” by your lender and are likely to get into accidents or traffic violations. The premiums for this kind of insurance coverage are usually high, but you can find many lower cost options if you comparison shop. You can also choose different types of PIP policies from your lender.
There are many other deductibles that you can set for your auto insurance policy as well. These can include the deductible for medical expenses. Your deductible for medical expenses will be the amount that you pay first, before the insurance pays anything. You can choose higher or lower deductibles for this purpose. You can also increase or decrease the amounts for deductibles related to collision coverage and comprehensive coverage. When you increase the deductibles that you pay out of pocket, you limit how much you will pay in the case of an accident.