Auto Insurance: Important Definitions
United States law dictates that every car owner must be covered under some type of auto insurance. This law exists in order to protect the car owner against bodily damages he may suffer in an accident as well as damages caused to his car. This also protects other individuals from damages that he may accidentally cause.
Auto Insurance Coverage determines the obligations and the responsibilities of a person who insures a car (a policy holder). This defines what happens what happens in case there is damage to his car, his car is stolen, or he is involved in a car accident (which may or may not be his fault).
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 term involves ones legal responsibility for bodily injuries and for property damage caused by him. This assures the policy holder that whatever happens, the insurance company will protect him – to some extent – from bodily or property damages he has caused.
Medical Coverage: this term applies to the amount of money paid for the hospitalization and treatment of injuries incurred during an accident, as well as the costs of rehabilitation, and wages lost by the injured person during this time of incapacitation.
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 most basic insurance policy available and protects a policy holder in the event he accidentally damages someone or their property. It is also the cheapest car insurance available.
Fire and Theft: this type of policy protects a car owner from situations where his car is either burnt or stolen, but it does not protect him from other situations, such as property damage or medical injuries.
Collision: if this option is included, the policy holder is not financially responsible for repairing his car when it is involved in a car accident, even in the even he caused it. Pretty good option to have.
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 also specialized policies that suitable to some scenarios.
Classic car insurance: this policy is equivalent to a comprehensive car insurance in all ways, except that it covers a car older than 25 years. However, normally there are extra stipulations, such as the owner cannot drive more than a predefined number of miles every year.
Rental Reimbursement: in the event a policy holder’s car is unavailable (i.e. it is in repairs as a result of an accident), this policy ensures that the car owner gets 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.
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