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Auto Insurance Primer
By Belinda Waters
What is auto insurance? Auto insurance (or car insurance, motor
insurance) is insurance consumers can purchase for cars, trucks, and
other vehicles. Its primary use is to provide protection against losses
incurred. By buying auto insurance, depending on the type of
coverage purchased, the consumer may be protected against:
* The cost of repairing the vehicle following an accident
* The cost of purchasing a new vehicle if it is stolen or damaged
beyond economic repair
* Legal liability claims against the driver or owner of the vehicle
following the vehicle causing damage or injury to a third party.
Liability insurance covers only the last point, while comprehensive
insurance covers all three. Even comprehensive insurance, however,
doesn't fully cover the risk associated with buying a new car. Due to
the sharp decline in value immediately following purchase, there is
generally a period in which the remaining car payments exceed the
compensation the insurer will pay for a "totaled" (destroyed, or written-
off) vehicle. So-called GAP insurance was established in the early
1980's to provide protection to consumers based upon buying and
market trends. The escalating price of cars, extended term auto loans,
and the increasing popularity of leasing gave birth to GAP protection.
GAP waivers provide protection for consumers when a "gap" exists
between the actual value of their vehicle and the amount of money
owed to the bank or leasing company. In some countries including
New Zealand and Australia market structures mean that people are
more likely to buy a nearly new car than a new car so this is less of a
problem.
In the United States, liability insurance covers claims against the
policy holder and generally, any other operator of the insured's vehicle,
provided they do not live at the same address as the policy holder and
are not specifically excluded on the policy. In the case of those living
at the same address, they must specifically be covered on the policy.
Thus it is necessary for example, when a family member comes of
driving age they must be added on to the policy. Liability insurance
generally does not protect the policy holder if they operate any
vehicles other than their own. When you drive a vehicle owned by
another party, you are covered under that party's policy. Non-owners
policies may be offered that would cover an insured on any vehicle
they drive. This coverage is available only to those who do not own
their own vehicle.
Generally, liability coverage does extend when you rent a car.
However, in most cases only liability applies. Any additional coverage,
such as comprehensive policies, i.e. "full coverage" may not apply.
Full coverage premiums are based on, among other factors, the value
of the insured's vehicle. This coverage may not apply to rental cars
because the insurance company does not want to assume
responsibility for a claim greater than the value of the insured's vehicle,
assuming that a rental car may be worth more than the insured's
vehicle. Some states, such as Minnesota, may require that it extend
to rental cars. Most rental car companies offer insurance to cover
damage to the rental vehicle. In some regions, the costs associated
with not having access to the vehicle ("Loss of Use") is also covered.
About the Author
What is auto insurance? A basic primer on auto insurance.
Article Source: http://www.simplysearch4it.com/article/6703.html
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