Categories of Auto Insurance
A Insurance Article Contributed by Deepak Cutting
Liability Auto Insurance
This type of auto insurance is a legal requirement for all drivers. It is also called the third party insurance. This covers the auto owner in respect of damages caused to someone else through his vehicle. It could be split into two broad categories, as follows;
* Bodily injury liability: As the name suggests, in the event of an accident, claims arising from the injury/medication costs or loss of life of some other person by the insured, are to be covered by this type of policy.
* Property damage liability: Claims arising from damage to the property of someone else caused by the insured, are covered by this type of policy.
The Liability Auto Insurance covers both the above stated types of risks in a certain defined ratio, usually referred to as 'split limits'. For example an insurance cover referred to as a 50:100:25 policy which means that it provides protection up to a maximum of $50,000 in respect of bodily injuries caused to any one person, $100,000 in respect of the total amount of claims on account of bodily injuries to everyone involved and $25,000 in respect of claims arising from damage to property, in any one accident.
Each state mandates a specific minimum amount of risk cover.
Medical Payments Auto Insurance
Such an auto insurance policy provides cover for medical treatment needs of the insured and other passengers in his automobile, in the event of an accident. The provision is available irrespective of whether or not the insured person was at fault.
The PIP (Personal Injury Protection) is similar to the Medical Payments Insurance and is broad based. It also provides for compensation for loss in wages, pain & suffering and funeral expenses.
Uninsured & Underinsured Auto Insurance
As the name suggests, where the insurance cover is either missing or is inadequate to provide for the at-fault drivers liability. Uninsured Auto Insurance cover is required when the at-fault driver does not have a valid insurance policy and the Underinsured Auto Insurance cover is required in case there is no insurance cover to pay for damages.
Most states require one or other type of auto insurance cover but some states require both types of insurance covers.
Collision Auto Insurance
Such an auto insurance cover pays for repair to the insured person's car up to the 'fair market value' of that automobile, when the driver is at fault.
In case the auto is damaged beyond repair, it is written off as a 'total loss' and the damaged auto becomes the property of the insurance company, against payment of 'the fair value' of that vehicle by them.
Please note that the amount of claim will not always equal the amount of loan outstanding, in case the automobile is financed. To meet the loan liability in excess of the value of reimbursement due, a policy named 'gap insurance' is available.
Collision Auto Insurance comes with optional 'deductibles'. This is the amount that the insured person agrees to meet out of each claim on his own, in return for a reduced insurance premium. The higher the 'deductible', the lower the premium.
This type of insurance is not mandatory. However, if the automobile is financed, most lenders insist on such coverage. A 'gap insurance' in addition, completes the liability of the borrower.
Comprehensive Auto Insurance
This is like collision insurance but provides a wider cover including damage by an unknown party, any other natural calamity or theft, fire, vandalism etc. The exact extent of risk cover is provided in the policy document and must be looked at.
Here again, the insurance company will pay for the cost of repair, up to the fair value of the automobile. This is not a legal requirement in any state but a requirement of the finance company, if the auto is financed.
