Sunday, January 27, 2008

Auto Insurance 101

Auto insurance, as the term suggests, is insurance that you can purchase for your vehicle (cars, trucks, SUVs, motorcycles, etc.). It supplies protection against losings incurred as a consequence of vehicle accidents. While the merchandise looks simple, there are many different types of auto insurance policies available for purchase. Depending on the policy that you choose, your coverage degrees and types will vary. Broadly speaking, these are the types of auto insurance programs on the market today:

Coverage:

• ‘Comprehensive coverage’ (Comp) – This sort of insurance sees your vehicle against the cost of buying a new vehicle if it is stolen or destroyed in a fire.

• ‘Collision coverage’ (Coll) – This sort of insurance sees your vehicle against the cost of repairing the vehicle following an accident or the cost of buying a new vehicle if it is damaged in an accident beyond economical repair.

Protection:

• Personal Injury Protection (PIP) - This sees against the cost of medical disbursals and lost wages related to the use, ownership or care of a motor vehicle. This insurance is compulsory in some U.S. states.

• Medical Payments (MP) - sees against the cost of medical disbursals for bodily injury sustained in an accident beyond any disbursals that may be covered by PIP.

• Legal liability claims against the driver or proprietor of the vehicle following the vehicle causing damage or injury to a 3rd 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 dwell 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 facets of damage which can impact the car itself or the driver, there is one hazard associated with purchasing a new car is not covered even by comprehensive insurance – once the car is bought, there is a crisp diminution in its value. During this time period (immediately after a car is bought), in which the remaining car payments transcend the value of the vehicle and thus the compensation the insurance company will pay for a ‘totaled’ (destroyed, or written-off) vehicle, clients may see buying ‘GAP insurance’. gap insurance was established in the early 1980's to supply protection to consumers based on purchasing and market trends.

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