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The Inner Workings Of Car Insurance Coverage

American Government Special Collections Reference Desk

The Inner Workings Of Car Insurance Coverage

Adrianna Noton
October 10, 2011

Car insurance can be a tricky concept to understand. There are different companies who promote different aspects and can sometimes forget to educate their insureds about basic coverage. Obtaining a quote from a company can sometimes lead a person back to their original policy. If it is their first time purchasing automobile coverage, then it is even more important they understand what they are getting.

The foundation for a vehicle policy is called liability. The purpose of the coverage is in case you cause damage to someone else's vehicle or property or if you injure them. The first half of liability is called bodily injury liability. There are different amounts a person may select to purchase. For example, someone may chose fifty thousand dollars per person, but not to exceed one hundred thousand per accident. This means if they were to be involved in an accident and they were determined to be at fault for it, their insurance will pay these amounts to the other person they injured for their medical bills and losses.

If the other person had two people in their automobile and both needed forty thousand dollars to cover their bills then based on the example the person's policy would potentially cover these costs. If that vehicle held three people needing those amounts then it would exceed their policy. This means once the cap of one hundred thousand dollars was met the person who was at fault would have to find other means of paying for the remaining balance. It is important to tell a person about these types of situations when obtaining a quote for insurance. If the person did not have enough coverage, they could be sued and may lose property they own.

The second half of liability is titled property damage. Property damage covers the other person's car in the event the policyholder is at fault. These have limits like the bodily injury coverage. The amount selected is a single maximum amount. Property damage liability pays for the damage caused by the insured while operating the motor vehicle.

Comprehensive coverage is optional and can be added for the policyholder's vehicle. Comprehensive covers losses such as theft, water, fire, acts of God, glass, collision with an animal, etc. In order to use this coverage the person must pay their deductible. The deductible amounts can be anywhere between zero and twenty five hundred. Usually, the lower the deductible the higher the premium cost.

Collision coverage is also optional and is meant for the policyholder's vehicle. This is in place in the event the person is at fault in an accident and causes damage to their own vehicle. This coverage also has a deductible within the same range.

Lastly, are the additional options many companies offer. Few offer roadside assistance and GAP insurance. Most offer rental car reimbursement and towing. Both may be used in the event of a covered loss. If the vehicle is inoperable and a rental car is needed, their are preset maximums that may be selected. The same is for the towing option. There may be times when an accident renders a vehicle unsafe or impossible to drive and a tow truck is needed.

Understanding the policy features may help a person make better decisions in choosing their coverages. Insurance companies can provide a person with a price before they buy their policy. Any additional questions can and should be asked before making the purchase.

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