Auto Insurance – Types of Coverages

Auto insurance is basically insurance for automobiles, trucks, motorcycles, or any other road-going vehicles. Its primary function is to offer financial protection against bodily damage or bodily injury caused by vehicular accidents and from liability which can also arise due to road-related incidents in a car. The auto insurance schemes are categorized into two categories: namely comprehensive and collision. The collision auto insurance provides protection against damages due to collision of the automobile with another vehicle or object. The comprehensive insurance provides insurance against damage due to fire, theft, vandalism, malicious mischief, weather disturbances, and vandalism.

In case of any accident, the onus of proving that you were not at fault lies with the insurance company. They have the responsibility of determining the fault of an accident and then assigning a percentage of the premium in accordance with the percentage of fault. So if the insured party points out that they did not cause the accident, it is their responsibility to pay the rest of the amount, irrespective of whether they exercise reasonable care or not in preventing the accident.

Underinsured motorist coverage reimburses the cost incurred on the part of the policy holder due to injury or damage done to another driver or his vehicle because of the carelessness or negligence of the insured. This type of coverage also pays the cost incurred on another driver’s vehicle or personal property if the insured is found at fault in an accident. Underinsured motorist coverage reimburses an uninsured motorist or persons who are injured or damaged as a result of an accident. This does not apply to cases in which the policy holder was at fault but did not have sufficient coverage to pay for the accident. Underinsured motorist coverage also reimburses the policy holder in cases where he or she causes an accident or damage with his or her vehicle.

Full coverage, which includes both collision and comprehensive, is usually the most expensive type of auto insurance. It provides coverage for damage caused by collision with other vehicles and for damages caused by theft, fire, vandalism, malicious mischief, flood, earthquake, sabotage, animals, and other causes. Some Full Coverage policies provide coverage for medical costs incurred by the policy holder or his or her guests. Comprehensive coverage provides coverage for damage caused by acts of nature such as floods, storms, earthquakes, snow, vandalism, explosions, civil disturbances, riots, war, terrorism, flood and wind. The states require insurance companies to sell these types of policies.

Different levels of deductibles are permitted for various types of auto insurance coverage. Auto insurance premiums may be raised by as much as fifty percent depending on how much the insured car is worth. A higher deductible allows the policyholder to get discounts on premiums.

There is another type of policy called a Raise By Higher Deductible policy that enables the policyholder to pay the same deductible but increase the premium to cover the difference. Either way, the policyholder will not see any savings since the insurance company agrees to cover the difference. A policyholder can choose to pay the full premium or choose to take out a policy with a deductible higher than the standard level. Whichever option he or she chooses, the savings will be passed on to him or her.

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