Buying a car insurance can be an overwhelming experience especially if you are a first-time user. Not only do you need to choose from amongst the various insurance providers but you also need to select the best fit from the different types of car insurances offered to you. To make things easier, we walk you through five basic types of car insurance, what they cover and how they work. Read on:
It is one of the most basic insurance coverage which is often made mandatory to purchase in most countries. This insurance comes to your rescue whenever you are involved in a car accident for which you are held responsible i.e. it happened because of your fault or negligence. The benefits offered to any car owner under this plan are:
- Coverage of repair/replacement cost for the damaged car of you as well as the third party till the specified property.
- Coverage of medical bills for you and the third party for hospitalization or medical bills till the specified limit.
One should always opt for a slightly higher premium than the mandatory requirement here as accidents is a high-risk factor in any person’s life. Since both you and the third party are covered here and the insurance pays only till the specified limit; you will be required to bear all extra expenses. Getting your limit as high as possible for you gives you an extra layer of protection.
In India, this is popular as third-party insurance where it covers damage cost and medical bills only of the third party arising out of an accident due to your fault. It does not cover your medical bills or damage cost to your car.
Comprehensive coverage covers all those damages to a car which happens due to causes unrelated to any covered accidents. This could be the damages to your car due to weather issues like a tree falling on it; an animal hitting and scratching your car; your car glass breaking,vandalism, etc. These all situations are beyond your car and no other car insurance covers this type of damages.
This is a trifle expensive insurance cover but a good option to keep if you can afford it. Often a lien holder must have this coverage as this is a pre-requisite by the lender. A fantastic feature about this insurance cover is that it has a deductible. Thus, you will need to pay a certain amount before your insurer honors your claim but this can also take your premium down and make it more affordable.
When you opt for this insurance plan; the insurance company bears the cost to repair your car after an accident with another vehicle or even when your car gets hit against a tree, fence, etc. If your car gets ‘totaled’ because of the accident; the company pays you the current market value of the car as compensation.
This coverage is often an optional purchase but is often a mandatory requirement if your vehicle has a lien on it. The cover for this is often decided by the age of the car. A new car must always be covered by this insurance plan while it may be a nominal premium amount for an old car.
Personal Injury Protection
No matter what type of car insurance you are purchasing, the personal injury protection or PIP plan is recommended for all. We all know how easily the cost due to an accident can escalate. Without looking into who is at fault in an accident; this insurance covers the medical bills of the driver and all other passengers in the car who were present inside when the accident occurred. It even covers loss of income due to the accident and sometimes, child care expenses. This plan can cover up to seventy to eighty percent of the cost arising out of the accident, depending on your insurance limit.
Uninsured and Underinsured Motorist Coverage
Despite the words of caution and mandatory legal requirements; not all drivers have an insurance cover. In case you find yourself in an accident situation with such a driver; Your insurance limits may not be sufficient to cover your medical bills as well as repair costs to your car. In such situations, the uninsured and underinsured motorist coverage proves a boon. This plan covers the amount exceeded by your original insurance plan.
This policy is relatively cheap to buy and thus is highly recommended for all.
Plenty of thought and consideration must go into the car insurance policy that you purchase for your car. It should be such that it minimizes your risks and maximizes your benefits. They should be taken based on the make and model of your car, its age, geographical factors and plenty of other considerations. It is only the right car insurance policy that can lend safety to your car and protect it for years to come.