|
Auto Insurance 101
By: Chris Tolamalu
Auto insurance, as the term suggests, is insurance that you can purchase for
your vehicle (cars, trucks, SUVs, motorcycles, etc.). It provides protection
against losses incurred as a result of vehicle accidents. While the product
seems simple, there are many different types of auto insurance policies
available for purchase. Depending on the policy that you choose, your coverage
levels and types will vary. Broadly speaking, these are the types of auto
insurance programs on the market today:
Coverage:
• ‘Comprehensive coverage’ (Comp) – This kind of insurance insures your vehicle
against the cost of purchasing a new vehicle if it is stolen or destroyed in a
fire.
• ‘Collision coverage’ (Coll) – This kind of insurance insures your vehicle
against the cost of repairing the vehicle following an accident or the cost of
purchasing a new vehicle if it is damaged in an accident beyond economic repair.
Protection:
• Personal Injury Protection (PIP) - This insures against the cost of medical
expenses and lost wages related to the use, ownership or maintenance of a motor
vehicle. This insurance is mandatory in some U.S. states.
• Medical Payments (MP) - insures against the cost of medical expenses for
bodily injury sustained in an accident beyond any expenses that may be covered
by PIP.
• Legal liability claims against the driver or owner of the vehicle following
the vehicle causing damage or injury to a third party.
While ‘Liability insurance’ covers only legal liability, ‘comprehensive
insurance’ covers PIP, MP, as well as legal liability. In the United States,
liability insurance covers claims against the policyholder and any other
operator of the insured’s vehicle. If, however, any other operators live at the
same address, they must specifically be covered on the policy. For rented
vehicles, most rental car companies offer insurance to cover damage to the
rental vehicle.
While comprehensive insurance covers most aspects of damage which can affect the
car itself or the driver, there is one risk associated with buying a new car is
not covered even by comprehensive insurance – once the car is bought, there is a
sharp decline in its value. During this period (immediately after a car is
bought), in which the remaining car payments exceed the value of the vehicle and
thus the compensation the insurer will pay for a ‘totaled’ (destroyed, or
written-off) vehicle, customers may consider purchasing ‘GAP insurance’. GAP
insurance was established in the early 1980's to provide protection to consumers
based on buying and market trends.
About the Author:
Chris Tolamalu is interested in auto insurance. See http://www.autoinsurancelowdown.com
for more information.
|
