Car Insurance
Car insurance, also known as vehicle insurance, is purchased for protection against losses that could occur due to theft, traffic accidents or any other damage to the vehicle, at the course of its lifetime. The purchaser of the insurance, typically pays periodic premiums to safeguard themselves against such accidents and expect the insuring company to foot the bills and expenses of repairs to third-party property and vehicles in case of any damages.
In several countries, such as the U.S. an owner of a vehicle is mandated to purchase car insurance, to the level of at least covering the liabilities of third party in case of an accident.
Car insurance claims, policies and terms are different in different countries. But for the most part, barring the premium and coverage terms a typical insurance policy is of the same system. Depending upon the demographics, age-group and history of any traffic violations, the premium is fixed. For e.g. men typically drive more miles over the course of their life, than women, and hence are more susceptible to causing an accident, hence their insurance charges are typically higher. Similarly, teenage drivers are under most circumstances the cause of most traffic related violations, inclusive of drunk -driving, crossing speed-limits, and are at a higher risk of causing accidents, hence the premium paid by them is far higher. Other factors taken into consideration while fixing a premium amount are factors such as income level, type of vehicle, marital status, age group, no. of dependents, and the no. of years since the person has been driving (driving experience) and the history of traffic and legal violations.
The following are the typical types of car insurance coverage:
Liability - In case of a traffic accident, if the appraisers decide that the fault of the accident rests solely on you then you are liable to reimburse the expenses of repairing the other party's vehicle. In case of insurance, this means that if you have a liability insurance, your insurance company would pay for the expense. Their team will appraise the amount of money that would be required to bring the vehicle back to the original shape, prior to the accident, and compensate the party accordingly. This is typically the most popular coverage taken by everyone, since it insures against paying from your pocket for the damages caused to the other party's vehicle. This type of insurance will not compensate for the losses to your own vehicle.
Comprehensive- In case of a traffic accident there could be the following kind of losses: Property (your own , the 2nd party in the accident, or third party), medical or vehicular. A comprehensive insurance covers for all these damages, and ensures the insured pays the list amount of money towards such an expense.
Collision - Collision covers for the insured person's vehicle in case of an accident. It is usually not mandatory, but is requested to be purchased if the vehicle is bought on a mortgage or a loan.
Uninsured/ Underinsured coverage - If you are in an accident caused by a 2nd party that is not insured or not significantly insured, this kind of premium would cover the expenses equivalent to a repair or the value of the vehicle.
Insurance is a very complex topic and hence needs a lot of research and information before being purchased.