The
Basics of your car insurance policy
So what elements
make up your insurance policy? This section will cover the
elements of a policy so that you will have a good understanding
of what you are receiving quotes for. You must compare apples
to apples in order to figure out what insurance policy offers
the lowest price.
The standard types
of coverage are: Collision/Comprehensive, Medical, and Liability.
Other forms of coverage include Uninsured Motorist, Underinsured
Motorist, Umbrella, Gap Insurance, and various types of Optional
Insurance. No-fault insurance is an option available by law
in some states. A familiarity with these terms will assist
in leveraging the available options to achieve the most thorough
coverage at the lowest premiums.
Collision
Collision insurance is the section of an insurance policy
that covers damage to a vehicle no matter who was at fault
for the accident. The depreciated value of the vehicle, not
the actual cost involved in replacing it, determines the maximum
amount that is covered by the Collision insurance. If the
accident was another driver's fault, the victim's insurance
company will collect the money for repairs from either the
other person directly or from their insurance company. Comprehensive
insurance is the part of the policy that covers damage to
a vehicle by vandals, thieves, natural disasters and the like.
Medical insurance
Medical insurance covers the immediate medical costs for the
insured driver, their family members, and any other passengers
that were in the car at the time of the accident. In the event
that medical bills rise beyond the limits provided by the
insurance policy, passengers who are not a member of the family
have the option to acquire compensation from the driver's
liability insurance. Family members are exempt from this scenario,
and it is suggested that families inquire as to additional
sources of medical insurance for extra protection and coverage.
This will also offset medical bills if they are passengers
in a collision vehicle, or if they are a pedestrian that is
hit by a vehicle.
Liability insurance
Liability insurance covers injuries to people and damage to
property, criteria that an insured individual is legally responsible
for when they or others drive their vehicle. This coverage
will pay for injuries to family members listed as drivers
with the insurance company, and will also cover the same for
other drivers of that vehicle if they have permission to be
driving it. In the case where family members are traveling
as passengers in the vehicle at the time of an accident, it
is Medical insurance, and not Liability insurance, that covers
them.
Uninsured Motorist
insurance
Among the other forms of coverage is Uninsured Motorist insurance,
which pays for damage to property and personal injury caused
by another driver who does not have any insurance. Uninsured
Motorist insurance is also applicable to hit-and-run situations
where the guilty party cannot be tracked down and held liable.
Underinsured
Motorist insurance
Underinsured Motorist insurance also pays for damage to property
and personal injuries sustained in an accident caused by another
driver. In this case, the party responsible for the collision
might not have an insurance policy that has a limit high enough
to cover all the repair bills and medical bills. The Underinsured
Motorist insurance policy will pay the difference after the
guilty party's limit is used up.
Umbrella insurance
An Umbrella insurance policy can be added when an individual
has homeowner's liability coverage, essentially providing
payments for property damage and personally injury for which
the individual is legally responsible, over and above the
automobile insurance up to the umbrella limit. The extra charges
for the premium are quite minor, and are usually only a small
percentage of the car insurance policy itself. Not only does
the owner get further insurance in vehicle-related situations,
but the limits of the homeowner insurance policy can be supported
by the extra coverage as well.
Gap Insurance
For drivers with vehicles on lease or financing programs,
Gap Insurance is a common part of an insurance policy. This
covers the difference between the amount of money granted
under Collision/Comprehensive insurance for a total loss collision,
and the amount required to pay off the lease or financing
agreement remaining on the vehicle. It is suggested that all
individuals in a lease or financing arrangement opt for Gap
Insurance, as it will protect them from situations where the
amount of payments left on the vehicle is greater than what
the pay out will be under a standard Collision/Comprehensive
policy, leaving them with a significant difference.
Road side assistance
There are other types of insurance that are available as options,
and these often cover necessary repairs while traveling, such
as towing in emergency situations, and reimbursement for rental
car charges when the vehicle is in for repairs. Those who
spend a significant amount of time on the road for personal
or business purposes might want to consider these choices.
No-fault insurance
Some states have laws that provide for no-fault insurance,
where an insurance company must pay for personal injuries
no matter which party was responsible for the collision. New
York, New Jersey, Massachusetts, Minnesota, Kansas, North
Dakota, Utah, Pennsylvania, Kentucky, Michigan, Utah, Florida,
Colorado, and Hawaii all have these no-fault insurance provisions.
With a familiarity
with these terms under your belt, you can then proceed to
identify some of the criteria that can affect the cost of
automobile insurance.
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