Its primary use is to provide protection against losses incurred as a result of trafiic accidents and against liability that could be incurred in an accident.
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Collision coverage is optional and provides coverage for an insured's vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable.
While your driving history is the number one factor in an insurance company determining your premium, the sort of car you drive also plays a role. Insurance companies take into account the sticker price, the cost to repair the vehicle, replacement value, safety features, and how well it will withstand an accident.
The higher the cost of claims for a vehicle, the higher the rates, and therefore the harder it is to get insured. Not only do they have a higher ticket price at the dealership and cost a mint to fill-up, SUVs are also a magnet for higher insurance premiums. On average, it costs 10-20 percent more to insure a SUV than a regular car.
Due to the large number of vehicles plying on the roads, traffic accidents have become a common phenomenon these days. According to statistics a traffic accident occurs every 3 seconds in the United States. Other than following traffic rules, one can do not much about the traffic accidents. However one can reduce the financial risk associated with a traffic accident by obtaining a vehicle insurance.
Vehicle insurance provides insurance cover for costs incurred by the insured due to accidents. It is mandatory by law for all vehicle owners to have a vehicle insurance. Driving a car without insurance is a punishable offence. The individual is liable to be fined and/or license and registration revoked and/or sentenced to jail. Hence it is very important to get a vehicle insurance both for financial and physical security. There are differences in vehicle insurance and the corresponding terms are explained below.
Premium is the amount you pay to the insurance company for providing the insurance cover. The premium depends upon factors like, model and age of vehicle, your age, gender, usage, policy etc. The vehicle insurance company bears the cost due to the accident like vehicle damage, property damage etc.
Coverage is provided to three parties under vehicle insurance namely the insurer, the vehicle and third party. Third party means a party involved in the accident, for instance if you have an accident with another vehicle, that vehicle and its driver are the third party. There are different types of policies depending upon the type of coverage and are explained in the subsequent paragraphs.
Comprehensive coverage provides coverage for costs due to damage by any process such as vandalism, weather, animals, theft etc. Usually the vehicle becomes unusable after accident. The insurance company pays the expenses incurred for towing and other roadside assistance under towing insurance coverage. After an accident you may have to rent a vehicle till the insurance company pays you for the vehicle damage or replaces your vehicle. The rental cost will be borne by the insurance company under rental coverage.
During accident if you damage somebody's property or his vehicle, the costs incurred such as repair/replacement of third party vehicle, medical costs of third party etc will be borne by the insurance company under liability insurance coverage. If somebody else is driving your car then he is also covered under your insurance. However if you are driving someone else's car then you will be covered by that vehicle's insurance and not your vehicle's insurance. However a non-owners insurance policy provides that flexibility also.
If the third party is at fault in the accident then his insurance has to bear the cost. However if the third party is under insured and is not in a position to pay the costs, then your own insurance will bear the expenses if you have under insured coverage.
Both Sarah Carpenter & Keith George are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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