Auto Insurance: Important Definitions
2:36 AM
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.
Definitions:
Property Coverage: this describes the amount of coverage available to a policy holder whose car was damaged in an accident, or through other means, such as vandalism. It also includes the theft of his car. Obviously this is an option every car owner should want to obtain.
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 defines the amount of coverage the insurance provider is willing to provide for the treatment of injuries and hospitalization sustained during an accident, as well as the costs of rehabilitation. In some cases, it also covers the wages lost by the injured person while he cannot not work.
The following are standard policies:
There is a great variety of auto insurance policies which exist for the purpose of indemnifying the car owner in case of loss, injury or damage. These also can be classified into several types.
Third Party: this is the bare minimum policy a car owner must possess in order legally comply with US laws. Unsurprisingly, it is also the cheapest car insurance available. Put simply, this plan protects the policy owner in case he accidentally damages 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!
There are also more specialized types of policies:
There are many types of special auto insurance plans, for special scenarios. Here are several examples.
Classic car insurance: covers a car that is older than 25 years. In principle it is equivalent to a standard comprehensive car insurance, however, it may have a limitation on the number of miles the owner can drive per year.
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.
Regardless of the policy a car owner has, it is important for him to be familiar with his policy. Some auto insurance providers do not reimburse 100% of the value of a stolen or damaged car, but rather return only 80%, with the rationale being that this prevents frauds - accidents or thefts initiated by the owner of a car who simply dont want them anymore.
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.
Definitions:
Property Coverage: this describes the amount of coverage available to a policy holder whose car was damaged in an accident, or through other means, such as vandalism. It also includes the theft of his car. Obviously this is an option every car owner should want to obtain.
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 defines the amount of coverage the insurance provider is willing to provide for the treatment of injuries and hospitalization sustained during an accident, as well as the costs of rehabilitation. In some cases, it also covers the wages lost by the injured person while he cannot not work.
The following are standard policies:
There is a great variety of auto insurance policies which exist for the purpose of indemnifying the car owner in case of loss, injury or damage. These also can be classified into several types.
Third Party: this is the bare minimum policy a car owner must possess in order legally comply with US laws. Unsurprisingly, it is also the cheapest car insurance available. Put simply, this plan protects the policy owner in case he accidentally damages 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!
There are also more specialized types of policies:
There are many types of special auto insurance plans, for special scenarios. Here are several examples.
Classic car insurance: covers a car that is older than 25 years. In principle it is equivalent to a standard comprehensive car insurance, however, it may have a limitation on the number of miles the owner can drive per year.
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.
Regardless of the policy a car owner has, it is important for him to be familiar with his policy. Some auto insurance providers do not reimburse 100% of the value of a stolen or damaged car, but rather return only 80%, with the rationale being that this prevents frauds - accidents or thefts initiated by the owner of a car who simply dont want them anymore.
About the Author:
Theodore Hoffstrader has been struggling for years with Auto Insurance matters, and has learned much from his trials. In this article he discussed several Auto Insurance Basics. To view more articles that will help you better comprehend Auto Insurance procedures and possibly save you money, visit his site, the Auto Insurance Information Highway.
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