Let’s talk for a bit about car insurance, as this is the most common form of insurance outside of medical insurance. Car insurance has as its primary reason for existence the coverage of a car’s owner against possible loss financially due to an accident.
Car insurance policies will usually cover the following:
* Property, in the event the car is stolen or damaged
* Liability, should the owner of the car hurt others
* Medical, should those injuries involve anything from treatment, rehab, lost income or even cost of a funeral
Many countries, such as the United Kingdom, make their drivers have some of these coverages, but not necessarily all of them. If the car will be used to secure a loan, the lender might need a particular type of insurance coverage.
Car owners can be insured at various levels of protection based upon what is listed in their insurance policies. Not all states are the same, as some have their drivers purchase at the very least liability coverage to make certain their state’s car owners are able to pay for damage to other car owner’s vehicles should they get involved in a car accident. Other states, Wisconsin being one of them, are more lenient with their laws, requiring that drivers just show proof that they can handle themselves in a financially responsible manner.
Throughout the US, liability coverage protects the car owner and any other person who typically drives any other covered car, as long as they don’t live in the same house as the holder of the policy, and as long as that policy doesn’t specifically disclude them in that policy. If another driver lives in the same home as the policy owner, that other driver must be particularly named in the same policy. This means that a young person who grows up to the point where they can legally drive must be placed into the policy at that time. There will be times when certain liability insurance policies won’t cover the policy owner should they be operating other vehicles. Just because you have insurance doesn’t mean you are automatically covered when you get behind the wheel of another person’s car. And it doesn’t mean that their liability insurance covers you in their car. For this reason there are non-owner policies that you can look into. These are the kinds of policies one would get if they want coverage no matter whose car they are driving. However, these policies are only issued to people who don’t own a car of their own, and in some cases the government will make it necessary for someone who was found guilty of causing an accident previously to get this type of coverage.
Liability insurance covers injury to someone’s body or damage to someone’s property, and is shown on the policy as either BI or PD respectively. How much financial coverage a policy will carry depends on where that policy is made. No matter how much coverage initially goes into a policy, an insured individual can, should they not have any accidents up to that point, add more financial coverage if they are willing to pay a higher price for the additional coverage.
Property damage is when a driver who has insurance coverage, smashes into a tree in someone’s front yard. The liability insurance covering them will pay for the damage to the tree. Bodily injury is where a driver who has insurance coverage causes an injury to someone with his car, and this injury is the fault of the driver. But, is some areas, the injured person would have to go through their own insurance first, before the driver’s insurance will pay any claims toward his injuries. Should the injured person end up suing the insured driver, then the same liability insurance would cover any legal costs involved in the lawsuit.
In some states, there are one of two ways that a driver can receive his liability insurance coverage: single limit or split limit policies.
A single limit policy brings together both property damage and bodily injury in a single policy. An example would be if a driver with such a policy hits another car and not only hurts the driver, but the other passenger as well. Payment for injury to passenger and driver, along with damage to the other person’s car, would all be made through this one policy.
A split limit insurance policy separates the covered items into proper and bodily injury as two distinct coverages. Using the same example, the other person’s car would be paid through the property damage coverage, while the injuries to the other person and their passenger would be paid through the bodily injury coverage.
Taking it further, the bodily injury coverage is separated even more into both a maximum to be paid on any one injured individual and a maximum to be paid out in one accident.
These limitations are also differentiated by slashes in the policy, such as “property damage/bodily injury per accident/bodily injury per person.”
So a policy that requires $20,000 toward the bodily injury of one person, $30,000 toward the injury of multiple people at one accident, and $7,000 toward property damage, would see it listed in their policy as: $20,000/$30,000/$7,000.
Car rental insurance coverage
In most cases, if a driver gets insured through a private carrier, then the insurance coverage will include any car rentals. Comprehensive insurance, known as full coverage, will be applicable to any rented vehicles, but it would be a good thing to find out before renting any cars. The premiums for fully covered cars are based in part on the value of the car. The same full coverage will not fit rental cars because the rental car is typically more in value than the insured’s own vehicle, and insurance companies are not willing to cover for more than the original vehicle’s worth.
Most of the car rental companies will make their own insurance available to their customers, to cover at least basic damage to that rental car. However, these insurance policies might not even be necessary, as major credit card companies such as MasterCard and Visa will offer collision damage insurance as a supplement policy whenever cardholders rent a car using their cards. This type of supplemental insurance might hold restrictions to the cardholder, such as what type of car can be rented using this policy.
Whenever an insurance company talks about full coverage, they are talking about the joining together of collision and comprehensive coverage. Liability is typically included in the language of these policies. Full coverage can be a misleading title, as their are certain types of coverage that this would fall under, with different amounts of coverage, that might not all be inclusive under the name “full.”
It is also misleading to think that, just because a person buys a car and has it financed by either a credit union or a bank, that the car owner must purchase full coverage insurance. In some states, just comprehensive and collision will need to be bought, along with liability, but not necessarily a full coverage policy. Cars where the new owner paid cash or a car that has been paid off will only need liability insurance. The same is true if the car owner, who might have bad credit, buys their car at a dealer who also serves as the financial institution for the transaction.
Collision insurance protects cars that have been in accidents involving a collision. This type of insurance demands a deductible be paid first. Then the coverage will pay for any repairs to the damaged car, or pay the fair value of the car if it cannot be repaired. Not everyone is required by law to have collision insurance coverage, but if you are financing the purchase of a car, or obtaining a car loan, then the bank or lending institution would probably want you to carry this type of coverage, at least until they have received all of their money on the deal.
This covers everything other than actual collision damage, and also demands a deductible before paying anything out on the policy. This covers anything not considered a collision, such as the car catching fire, getting stolen, vandalized, weather damage or animal impact damage.
Uninsured or Underinsured Driver Insurance
This type of coverage is where another driver is found to be the cause of an accident or damage, but either doesn’t have insurance coverage at all, or doesn’t have the right kind of insurance coverage based upon the nature of the accident. This important insurance coverage is often overlooked by drivers, and is most prevalent in economically challenging times such as during recessions, when drivers tend to cut back as much as they can in the area of expenses.
Some other car insurance coverages include:
Loss of Use coverage: reimburses a driver for rental car expenses when their covered car is in for repair under a covered loss.
Loan/lease payoff coverage: this came about in the early 1980s to give protection to drivers that matched the value of market trends.
Because a car’s value drops significantly the moment it is bought, there is a time when what is borrowed against the car is greater than the value of the car itself. This is known popularly as being upside-down in the car, or traditionally as having negative equity in the car. Therefore, if the car sustains damage to it that is above the worth of getting it fixed, the driver can be left still owing a lot of money to the bank. With higher car prices and car loans that extend beyond the traditional duration, as well as more and more people leasing cars, the loan/lease payoff, or GAP coverage came into being. When the value of the car and the amount owed establishes a “gap”, then the insurance company will step in to pay. Sometimes the gap insurance will cover policy deductibles for the car owner. Some car dealers will offer this type of coverage, which will last for as long as the owner is paying on their car loan. Not everything will be covered by this type of insurance. Delinquent payment amounts, deferrals and extensions, refinancing instances, and any late fees or other similar fees, are not all covered under the loan/lease payoff coverage.
Because of this, a car owner should realize that they might still be responsible for some costs should they lose their vehicle during a time when they are still making loan payments to it.
Having towing coverage for your car is also known as roadside assistance. Usually, car insurance companies will cover costs of towing only if involved in an accident. But, this led to a lack of coverage in times of mechanical failure, or flat tires, or running out of gas. So insurance companies stepped in to fill that need by offering roadside assistance policies.
Personal Property Coverage
Items of a personal nature that are in a car and therefore damaged during an accident use this type of coverage. Any property not actually part of the car should really be a part of the homeowner’s policy or rental insurance coverage. But, there are some insurance companies who allow things like GPS units to be covered as part of the owner’s car insurance policy.