The right car insurance can help protect you, your family members, and other drivers. But, how does one know, and choose the right insurance that fits your needs the best? Here’s a primer to understanding auto insurance, and knowing what all auto insurance can do for you.
We insure our vehicles not only as a mandatory requirement, but also for genuine peace of mind against accidents, damage, and theft. But how well do we know what our auto insurance covers? Is there something better that is on offer? Let’s de-mystify auto insurance for you.
Auto insurance is a policy that covers your car against financial losses you may face in case of an accident or theft of your car. When you buy an insurance policy, you pay a certain amount of money known as the premium to the insurance company. In exchange, the insurer agrees to pay for accidental damages and theft losses to your vehicle. It is also legally required, in most countries worldwide for vehicles to be covered under an active car insurance policy. Hence, most of us buy auto insurance at the time of purchasing the vehicle itself.
The foundation of auto insurance policies is insuring liability. It pays for the damage you may cause to others. As part of the social and ethical responsibility of driving, you should be able to pay for damage you cause, and liability insurance in the form of your auto insurance policy provides a system for that.
Why do you need auto insurance?
Apart from fulfilling legal requirements, auto insurance ensures you can bear the cost of accident damages. In case your vehicle meets with an accident, you claim insurance instead of paying from your pocket.
But if you cause damage to another person’s car, you can bear the damage or loss of limb by claiming your third-party insurance, also known as liability insurance, which covers hospitalization and legal expenses too.
You are also covered against damage from natural calamities such as floods, earthquakes. You can claim against theft and vandalism if you have purchased comprehensive car insurance.
Why does a deductible exist?
While buying car insurance, you are asked to choose a deductible. This is the amount you are agreeing to pay, when a loss or damage occurs and has to be paid for. When a claim is actually made, the insurance company pays a part of the losses, and you pay the deductible chosen by you. For instance, if the total repair costs you have to bear after an accident is $200, and you had chosen a deductible of $50, then the insurance company will pay $150 and the rest $50 will be paid by you.
This kind of a joint arrangement of a deductible exists between you and the insurer, so that the owner handles their asset — in this case, their car, with a sense of responsibility. It ensures that car owners and drivers are not reckless and negligent towards driving and maintenance of vehicles.
So while buying an auto insurance policy, choosing a deductible is an important step as the amount determines your annual premium. Higher the deductible, lower will be the premiums.
What kind of auto insurance suits you?
While insurers sell auto insurance to you by considering various factors like — the brand, and the model of your car, what kind of driver are you, and your past car insurance history. You may choose to buy only a basic third-party cover/liability insurance, or a comprehensive car insurance policy.
Buying comprehensive car insurance in addition to the basic third-party cover puts your mind at ease about all possible damages and losses. It covers something basic third-party, or liability insurance will never cover — damage to your own vehicle, or compensate you if it’s stolen.
The comprehensive policy is a package of different types of features called add-ons, which you can select, and customize according to your needs. When faced with a grievous situation, or a disaster with your car, simply claim your auto insurance and be reimbursed as per the eligibility mentioned, and add-ons attached with your policy.
What does auto insurance not cover?
While we buy auto insurance expecting that we’re going to have a reliable safety net for the unexpected. But we also prioritize a good price over what the policy covers, and end up overlooking what it doesn’t cover. In general, the following are not covered by auto insurance:
- Occurrence of loss or damage when the policy has expired or is not active.
- When the person driving does not possess a valid driving license.
- Normal wear and tear of the car and its parts.
- Things Stolen from Your Car (buying comprehensive coverage can cover the theft of individual things that are considered part of the car, like stolen airbags).
- Usual depreciation on the car (buying a zero depreciation add-on can provide coverage).
- Electrical or mechanical breakdown, and damage to engine due to oil leakage (buying mechanical breakdown insurance add-on, can cover repairs such as engine problems and air conditioning issues, and roadside assistance coverage will come to the rescue when a tow or gas is needed, or if you have locked yourself out of the car).
- If the driver is found to be driving under the influence of liquor, alcohol or drugs.
- Loss or damage as a result of war, mutiny, and nuclear risks.
- If the car faces a mishap while being driven outside the country it was insured for.
- If the car is used for any other purpose other than its intended use (an auto insurance policy is intended to cover personal use of your vehicle, such as commuting to work, going on errands and taking summer road trips). Business use of the vehicle is generally excluded from coverage.
Prevention is better than a claim
While buying a comprehensive coverage auto insurance policy seems like the best bet since it pays the value of your car even if it’s stolen — the best defense remains prevention. Some simple, easy to practice preventive steps to ensure the well being of your car, and yourself are:
Common sense — Always remove your keys from the ignition, lock your doors and windows, and park in well-lit areas.
Install warning devices — Consider car alarms, and visual devices like column collars, steering wheel locks, and brake locks.
Immobilizing devices — Devices like smart keys, fuse cut-offs, kill switches, wireless ignition authentication, and starter, ignition, and fuel pump disablers can prevent thieves from bypassing your car’s ignition system, such as hot wiring, and prevent theft.
Tracking devices — These systems typically use GPS and wireless technology to alert you if your car has been moved and help you track and monitor the vehicle’s whereabouts.
