Car insurance is not just a means to cover the insured against the damages caused by an accident, fire or theft but is a legally mandatory requirement to drive a car on private roads by most of the states in US (except for New Hampshire, Tennessee and Wisconsin) and in other countries.
Depending on the type of car insurance you have, you can protect yourself from the risks of financial losses that can occur to you by wisely choosing a policy that gives you value for money. Here we give a brief overview of what is car insurance, what does a car insurance policy cover, factors on which its premium depends.
What is a car insurance?
It is a legal contract between the insured (the person who seeks insurance) and the insurer (the insurance company) to transfer the risk of loss (from insured to the insurer) caused by an unforeseen accident, theft or any other unforeseen occurrence in context of the car that an insured is driving.
What does a car insurance policy cover?
The Car Insurance policy can cover the following:
- The insured person: The person who purchases the insurance policy (herein called as insured) can seek to cover bodily injury, medical claims etc. for self and/ or companion .
- The insured vehicle: The insured can purchase a policy to cover the damages caused by collision, theft, natural disaster or riots to the insured’s vehicle.
- The Third party. : The third party is anyone who has a bodily or property injury caused by an accident for the fault of insured. He can claim for the medicinal expenses, and /or loss of workdays or funeral expenses (if death occurs) and even for compensation of grief and stress caused by it.
Of the three the minimum required care insurance pilcy coverage that the insured has to purchase is the third party policy in which the company promises to indemnify the specified losses caused to a third party because of insured’s fault.
The care insurance pilcy coverage that can be availed is of following types:
- Bodily Injury: This Bodily Injury of coverage will take care of the expenses incurred in treatment of the injuries and / or lost wages from missing work, rehabilitation and also if required funeral expenses caused to the car drivers passengers, the other driver and his companion and the pedestrians because of your fault.
- Comprehensive Coverage: Comprehensive coverage is the coverage that pays for damage caused from certain natural disasters, theft and vandalism.
- Property Injury Liability: The damage caused to other party’s vehicle, building or anything else because of insured’s fault.
- Accident & Complete Coverage: In this accident & complete coverage no matter who is at fault the insurer pays for repair or replacement of driver’s automobile.
- Personal injury coverage: In this Personal injury coverage the insurer compensates to the insured for personal injury, missed salary as well as home care due to a crash.
- Medical payments coverage: In this Medical payments coverage the insurer pays for hospital bills of car driver as well as passengers, regardless of responsibility.
What are the various factors on which the premium depends:
The premiums are either mandated or calculated on actuary based on statistical data.
The premiums have two components :
- A Flat per car per year rate that every one pays
- A variable component, which is based on the following factors:
- The Characteristics of car: Its Monetary value, degree of vulnerability for an accident,
- The Coverage Selected: Comprehensive, Third Party, Fire and theft etc.
- The profile of the Driver: Age, Gender, Education qualification, past records of driving, credit rating as a driver etc.
- The Usage Of Car: The car mileage, the distance traveled etc.
It is beneficial to pay the car insurance premiums on six monthly or yearly bases. The time period below this can make you pay higher premium rates for the same benefits that you can get on a six month or yearly premium. Seek advice of friends and relatives, visit websites to find comparable quotes and choose the car insurance agency that satisfies your needs and your budgets.
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