Literally meaning, auto insurance is a contract between the owner of a vehicle and an insurance company, wherein, the insurance company agrees to compensate the owner of the vehicle, to the extent of liability as agreed upon by both the parties. In return to which the owner of the vehicle agrees to pay a specific amount of money as premium.
Auto insurance is governed by the law of land, where the cover has been taken and is regulated by the insurance regulatory body of that land. For instance, auto insurance has been taken in UK, then, he laws of that land will apply on both the parties.
There are various types of auto insurance covers that are offered by all the general insurance companies. The type and amount of insurance cover provided depends upon the requirement of the owner of the vehicle and the value of the vehicle.
The type of coverage in all the policies differ, however, the auto insurance companies cover the following basic areas of protection to the owner as under:
• Liability coverage
• Medical coverage
• Damage to vehicle
Uninsured or under insured driver
Liability Coverage:
In this policy, the auto insurance company undertakes to cover all the liabilities that may arise towards the owner of the vehicle as a result of an accident. Suppose, you meet an accident and you are at fault, in that case, the insurance company comes forward and takes all the liability that arise regarding legal law suits, damage caused by you against 3rd party in respect to property and person.
The insurance company will help in all legal aspects and pay for all the expenses. However, in case you are not at fault, then the insurance company shall not pay for any expenses that may occur as a result of the accident.
Medical Coverage:
Under this coverage, the auto insurance company undertakes to pay for all the medical expenses that arise, to the owner of the vehicle as a result of an accident. This covers all the expenses starting from medical tests, operation expenses and also the hospital expenses occurred. The coverage usually is applicable to the driver and all the passengers until and otherwise mentioned in the policy.
Damage to Vehicle:
Under this coverage, the insurance company undertakes to pay for all the expenses that arise on account of physical damage caused to the vehicle as a result of an accident on drivers fault, arson etc.
Usually all the perils covered by the insurance company are mentioned in every single policy issued by the company.
Uninsured or Underinsured Driver:
Under this cover, the auto insurance company undertakes to cover all the liabilities that may arise on account of an accident caused by an uninsured or under insured driver in which the owner of the vehicle is travelling whether the vehicle is driven by the owner or is collided with a driver falling under this category.
Thus, auto insurance is simply a measure undertaken by the owner of the vehicle to limit his liability and on the other hand save money on account of liability and damages that may occur on account of an accident or by any man or man made calamity.
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