Why do we need auto insurance?

The answer is pretty simple - to safeguard against potential bankruptcy. This would probably not be the case always. You might get away with a minor expense. However, it is always a safer option to secure your future from the unexpected. Over the years, there has been a dramatic rise in the number of vehicles plying on the roads. Each year, thousands of accidents take place. Even if you are the best driver in the world, it is a near impossible task to be able to avoid an accident, minor though it may be. A stray animal might run across the road, a reckless driver might crash into your car, or in a worst case scenario, your car could be hit by lightning. These situations cannot be evaded. However, you can make sure that you do not lose a fortune trying to fix your car or paying for somebody else\'s damages.

Auto Insurance Types

There are two basic types of auto insurance? Third Party and Comprehensive. Third party insurance is an act only policy that covers any harm or damage caused to people other than the insured. Third party insurance is a mandatory requirement for all motor vehicles in all parts of the world. As per the terms of this policy, the insurance company covers the legal liability of the insurance buyer. Liability cases for this insurance include physical injury or death of a person other than the insured, damages to property that does not belong to the insured, etc. Comprehensive insurance covers the insured when there is a damage to his/her vehicle or the vehicle accessories. The reason for the damage could be anything. However, the policy doesn\'t cover wear or tear, breakdowns, failures, etc. Moreover, the coverage is not applicable when the insured or a person driving with his consent is under the influence of alcohol.

Auto Insurance Liability

Auto Insurance Liability or Third Party Insurance is the heart of auto insurance. When you are at fault in an accident, the insurance you have paid will be used to meet the expenses incurred by the third party for physical injury and property damage. It also covers your legal bills. Although liability insurance is compulsory, requirements for insurance vary depending on the region. In some states, you need to produce proof of liability insurance to register your car. In certain states, the proof is required only when you are involved in an accident. In some states, liability is not mandatory for motorcycles.

How It Works

In certain states, liability insurance is applied regardless of who is at fault in case of an accident. In case of a claim, the person liable for the damages has to pay for the medical bills of the other party even when he is not at fault. These rules were laid to ensure that there is no insurance fraud with regard to auto-injury and insurance premium costs. When you are buying third party insurance, it is always a better idea to buy more than the minimum insurance requirement. If you stick to minimum insurance, you may face a situation where you would have to pay more when there is a liability claim.

Factors Influencing Auto Insurance Liability

There are numerous factors to consider when you buy liability insurance. One of the most important factors is the minimum insurance requirements. The minimum requirements vary depending on which state you live in. It is imperative that you check what the minimum requirements are before you set the insurance value. Another factor you must consider is your asset value. The basic purpose of insurance is to secure a person against potential losses in a claim. So, when you have an idea of how much your asset value is, you can set your insurance value suitably. In addition to the above, you must also consider the ages of all the drivers in your home. If there are teenagers at home who drive your car, there is a higher likelihood of an accident. Hence, insurance value has to be set based on your estimate of the potential costs of a claim. Another important factor is your place of residence. Certain regions have a higher accident rate than others. For example, studies have found that places surrounding one's locality have a higher likelihood of an accident occurrence than a place farther away. So, if most of your driving is closer to your neighborhood, it is essential that you set the insurance value higher.

Caution

There have been many instances where people have complained about being taken for a ride about the insurance company. Insurance costs typically comprise two components? the deductible and the amount paid by the insurance company. Deductible is the part of the claim amount that you have consented to pay, while the remaining amount is paid by the company when there is a claim. The deductible on the policy is set by you. You can raise or lower the deductible to suit your preference. When the deductible is higher, premiums are lower and vice versa. However, people who have not been careful enough in setting their deductible aspect have complained that the company hasn't offered the coverage they had promised. You must understand that it is not obligatory for insurance companies to tell you everything.

 

 

When you buy insurance, ensure that you keep all these factors and elements in mind. When you are involved in an accident, try to take photos of the accident scene and record all the information pertaining to the people involved in the accident. This information will help you in a claim. Auto Insurance liability is a mandatory requirement and people do complain about the costs involved. However, you can always prevent a claim by driving responsibly and also acting sensibly in an accident which is not your fault. Moreover, do not forget to consider all the factors discussed above before you buy the insurance policy.