The basics of car insurance

Car insurance protects against financial loss in the event of an accident. It is a

contract between the policyholder and the insurance company. The policyholder undertakes to pay premiums and the insurance company undertakes to cover losses as

defined in policy.

Vehicle insurance provides property, liability and health insurance:

 Property insurance covers damage or theft of the car.

 Liability insurance is covers the policyholder's legal liability of

others for personal injury or property damage.

 Health insurance covers the costs of injury treatment, rehabilitation

and sometimes lost wages and funeral expenses.

Most states require drivers to have motor vehicle liability insurance before they can legally drive a car. (Liability insurance pays for the other driver's medical treatment, car repair and

other costs when the policyholder is at fault in a car accident.) All states have

laws that are set minimum amounts of the insurance or other financial security

drivers must pay for damage caused by their negligence behind the wheel if

an accident occurs. Most auto insurance policies for the six months to a year. Basic car

insurance consists of six different types of coverage, each of which is

price separately (see below).

1. Liability for Damage

This cover applies to injuries that the policyholder and family members named on the policy cause to someone else. These individuals are also covered when

drive foreign cars with a permit. Just like motorists in serious accidents

can be sued for large amounts, drivers may choose to buy more than the minimum required by the state to protect personal assets such as homes and savings.

2. Medical Payments are Personal Injury and Protection (PIP)

This coverage pays for the treatment of the injuries to driver or passengers

policyholder's car. At its pordest, PIP can be cover medical payments,

lost wages and replacement costs for services that someone normally performs

injured in a car accident. It can also cover funeral expenses.

3. Liability for damage to property

This coverage pays the policyholder for damages (or someone they are driving the car with

their permission) can cause on another's property. It usually means

damage to someone else's car, but also damage to street lights, telephone poles, fences, buildings or other structures hit by an accident.

4. Deduction

This coverage pays for damage to the policyholder's vehicle caused by a collision with another vehicle, an object, or as a result of a rollover. It also covers

damage caused by potholes. Collision insurance is generally sold with a deductible of $250 to $1,000 – the higher the deductible, the lower the premium. Even

if the policyholders are at fault for the accident, the accident cover will be paid out

is for the cost of repairing the car less the deductible. If the policyholder

not at fault, the insurance company can try to recover the amount they paid

from the other driver's insurance company, a process known as subrogation. If

if the company is successful, the deductible will also be returned to the policyholders.

5. Comprehensive

This cover compensates for loss due to theft or damage caused by something

other than a collision with another car or object such as fire, falling objects,

rockets, explosions, earthquakes, windstorms, hailstorms, floods, vandalism and riots,

or contact with an animals such as birds and deer. Comprehensive insurance is typically sold with deductibles of $100 to $300, although policyholders can opt for

higher deductibles as  to the lower their premiums. Comprehensive insurance can reimburse the policyholder even in the event of a cracked or broken windshield.

Some of companies offer to separate  glass coverage with or without a deductible.

States do not require the purchase of collision or comprehensive coverage, but

lenders may insist that borrowers carry them until the car loan is paid off. It can also be a

a requirement of some dealers if the car is on lease.

6. Uninsured and Under-insured Motorist Coverage

Uninsured motorist coverage will be paid by the policyholder, member

family or designated driver if one of them is hit by an uninsured or hit-and-run driver. Underinsured motorist coverage comes into play when at fault

The driver does not have sufficient insurance to pay the other driver's total loss. This coverage will also protect the policyholder who is hit as a pedestrian.

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