Insurance World

Due to the large number of vehicles plying on the roads, traffic accidents have become a common phenomenon these days. According to statistics a traffic accident occurs every 3 seconds in the United States. Other than following traffic rules, one can do not much about the traffic accidents. However one can reduce the financial risk associated with a traffic accident by obtaining a vehicle insurance.

Vehicle insurance provides insurance cover for costs incurred by the insured due to accidents. It is mandatory by law for all vehicle owners to have a vehicle insurance.

Driving a car without insurance is a punishable offence. The individual is liable to be fined and/or license and registration revoked and/or sentenced to jail. Hence it is very important to get a vehicle insurance both for financial and physical security. There are differences in vehicle insurance and the corresponding terms are explained below.

Premium is the amount you pay to the insurance company for providing the insurance cover. The premium depends upon factors like, model and age of vehicle, your age, gender, usage, policy etc. The vehicle insurance company bears the cost due to the accident like vehicle damage, property damage etc.

Coverage is provided to three parties under vehicle insurance namely the insurer, the vehicle and third party. Third party means a party involved in the accident, for instance if you have an accident with another vehicle, that vehicle and its driver are the third party. There are different types of policies depending upon the type of coverage and are explained in the subsequent paragraphs.

Comprehensive coverage provides coverage for costs due to damage by any process such as vandalism, weather, animals, theft etc.

Usually the vehicle becomes unusable after accident. The insurance company pays the expenses incurred for towing and other roadside assistance under towing insurance coverage.

After an accident you may have to rent a vehicle till the insurance company pays you for the vehicle damage or replaces your vehicle. The rental cost will be borne by the insurance company under rental coverage.

During accident if you damage somebodyґs property or his vehicle, the costs incurred such as repair/replacement of third party vehicle, medical costs of third party etc will be borne by the insurance company under liability insurance coverage. If somebody else is driving your car then he is also covered under your insurance. However if you are driving someone elseґs car then you will be covered by that vehicleґs insurance and not your vehicleґs insurance. However a non-owners insurance policy provides that flexibility also.

If the third party is at fault in the accident then his insurance has to bear the cost. However if the third party is under insured and is not in a position to pay the costs, then your own insurance will bear the expenses if you have under insured coverage.

The law requires liability insurance for all drivers and vehicles. This means that if you are involved in a serious accident, and it turns out that it was your fault, your insurance company will pay out any claims that are made against you. Extra coverage on your own vehicle, called comprehensive insurance, is optional.

Insurance companies based on a number of risk factors will calculate the price you pay for this insurance. Basically how it works is the more they feel you are at risk of crashing, and the more they think the resulting crash will cost them, the higher the premium you’ll pay.

Assessment

Common factors that will be to assess the premium are the value of the car you’re driving, the safety of that vehicle, the coverage you want, will there be deductibles or limits etc.? How much you’ll drive the car, how your driving record stands, how long you’ve held your license, your age, and if you are young, also your sex.

The premium is then calculated. Usually there is a flat per car, per year rate that everyone pays, regardless of other factors. The other factors will then alter this rate, generally upwards. So if your car is especially fast or dangerous your rate will be increased by a set amount. If it is very old, your rate goes up. If you’ve had one or more accidents in the past, your rate will go up. If you’re young and male, your rate will go up. The more of these factors you satisfy, the more your rate will be going up.

Discounts

As a sales enhancement, many car insurers offer a “low estimated future mileage” discount to customers who predict that the car’s mileage will be below some stated limit during the next premium period. There is no verification involved and no additional charge if the car is subsequently driven more than the stated amount. This arbitrary discount tends to foster customer belief in the mistaken idea that “miles” are just one of many classification factors used to raise or lower prices from the territorial base rate. In fact, odometer miles (which insurers do not use) are not a factor but a metric - the only valid basis for measuring each car’s consumption of insurance protection in on-the-road use.

The best way to save on car insurance is to shop around, keep a good clean driving record, drive safely, and choose reliable cars that are not known for their power and speed.