How do the basic Auto Insurance plans work?


Although every driver in USA carries auto insurance, most of them will not have understood the complete dynamics of their coverage. Reading the fine print is always skipped out when signing up for a policy. Understanding how the policy works not only helps in getting to the claim money faster, but also helps to settle disputes better, if there are any. Below are some pointers on what the insurance policy does and what it does not cover:

  • Liability insurance is the most common insurance that people sign up for because it is mandatory. Liability insurance covers the other driver involved in collision and pays for the damages of the other party‚Äôs automobile. It does not protect the policy holder or the automobile of the policy holder in the event of a collision.
  • Collision insurance covers automobile damage resulting in every kind of collision, including collision with other vehicles, trees, compounds, gates and even collision with animals. The extent of the damage to the vehicle and the fix needed to get the vehicle running is determined the insurance company and not the policy holder. The policy holder must take care that the auto parts being replaced are new and of good quality and not used.
  • Comprehensive insurance covers automobiles from damages due to natural disasters and extreme weather conditions. This includes hurricanes, earthquakes, snow storms, heavy rain, hail, riots, vandalisms and even thefts. But comprehensive insurance in areas which are prone to the above mentioned conditions will have high premiums. Model of the car and installation of security devices may help in reducing the premiums to certain extent.
  • Collision or comprehensive insurance will not protect individuals against physical injury resulting from an accident. Personal Injury protection plan must be included in the coverage to protect the policy holder and the family in the car at the time of collision. If the other driver involved in collision has third party medical liability, then the medical expenses for the treatment can be covered.
  • Uninsured motorist coverage protects the policy holder against auto damage and covers medical bills to certain extent, if the other party involved in the collision does not carry liability insurance. Signing up for this policy along with liability, if not any other insurance plan can provide the basic protection needed on the road. Banking upon the other drivers on the road to carry a liability is always unsettling, and buying uninsured motorist coverage insures against such events.