Automobile insurance or Vehicle insurance (also known as car insurance, motor insurance or auto insurance ) is insurance for cars, trucks, motorcycles, and other road vehicles. It has a major use which is to provide financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could also arise therefrom. In addition, automobile insurance may offer financial protection against as theft of the car (vehicle), and against damage to the car sustained from events other than traffic collisions, such as keying and damage sustained by colliding with stationary objects. The specific terms of vehicle insurance vary with legal regulations in each region.
Who is insured?
Auto insurance covers the vehicle and drivers. Generally, the main user of the vehicle is called the principal driver and the other users are called occasional drivers. When setting the premium, the insurer factors in the claims experience of the principal driver and that of the occasional drivers.
Who can sell you insurance?
There are two major insurance sellers, they are:
Insurance brokers: brokers offer the products of insurance companies with which they have agreements.
Insurance agents: agents work for a specific insurance company.
Before deciding to do business with either a broker or an agent, check out prices, the products being proposed and the quality of the service.
What is Auto Insurance Fraud?
Auto insurance fraud can occur when people knowingly misrepresent pertinent facts to a company or agent to obtain a policy or collect money to which they aren’t entitled.
There are many types of fraudulent schemes and scams, all of which increase premiums for policyholders of auto, life, health, homeowners and other types of insurance. Insurance fraud can be “hard” or “soft.”
Soft fraud: this occurs when normally honest people knowingly misrepresent facts on insurance applications or “pad” a claim with damages and injuries that never occurred. Here are some examples:
- Reporting to your agent or company that a car is principally garaged in New Jersey when it is garaged elsewhere.
- Understating the annual number of miles driven on an insurance application to reduce insurance premiums.
- Omitting high-risk drivers from your application or policy.
- Adding damages to a claim to cover the cost of your deductible or prior premiums paid.
Hard fraud: this occurs when an accident, injury, theft or other loss is deliberately staged, either by a lone person or as part of an organized fraud ring. These rings often join dishonest doctors, lawyers and repair shop owners in snaring innocent drivers with a staged collision that appears accidental. Here are some examples:
- A fraudster obtains insurance on a vehicle using a counterfeit title and registration. Later, a theft claim is filed on the “paper car.”
- A driver stops abruptly in front of your vehicle, causing you to rear-end it. In addition to collecting money for vehicle damages, the “crash dummy” also submits a claim for nonexistent injuries to collect more.
- A vehicle is found abandoned and burned before it is reported stolen by its owner.
Any form of auto insurance fraud is a serious crime that can lead to heavy fines and possible jail time. Protecting yourself from fraud scams is one way to help fight this crime.
Types of coverage
One’s Liability coverage will pay for bodily injury and property damage for which any covered individual becomes legally responsible. The Personal Automobile Policy will cover the member or any of the member ’s family member while using an automobile or trailer, and any person using his/her covered automobile with permission. The policy will pay up to the limits listed in your policy.
■■ Supplementary Payments
This coverage is in addition to member’s stated limits of liability. This section provides payment on accident-related expenses involving:
- Bail bonds;
- Premiums on appeal bonds and bonds to release attachments;
- Costs taxed against an insured and interest accruing after a judgment is entered;
- Loss of earnings because of attendance at hearings or trials at the insurance company’s request;
- Expenses for emergency first aid to others at an accident involving a covered auto; and
- Other reasonable expenses incurred at the insurance company’s request.
COVERAGE FOR DAMAGE TO YOUR AUTOMOBILE
This coverage is for direct and accidental loss to one’s covered automobile, or any non-owned automobile that meets the following definition: any private passenger automobile or trailer not owned by or furnished or available for the regular use of one or any of his/her family member while in the custody of or being operated by the member or any family member; any auto or trailer the insurance member do not own while being used as a temporary substitute for his/her covered auto because of its breakdown, repair, servicing, loss or destruction.
Collision means physical damage to the insurance member’s covered vehicle caused by an impact with another vehicle or object. This coverage pays the lesser of the cost of repair or ACV of your automobile.
■■ Other Than Collision (Comprehensive)
This coverage pays the cost of repair or ACV of your automobile less any deductible. Losses caused by the following are considered comprehensive claims:
- Missiles or falling objects;
- Theft or larceny;
- Explosion or earthquake;
- Hail, water or flood;
- Malicious mischief or vandalism;
- Riot or civil commotion;
- Contact with a bird or animal; or
- Breakage of glass.
MEDICAL PAYMENTS COVERAGE
This coverage pays for reasonable and necessary medical and funeral expenses due to an automobile accident. Individuals covered under this coverage include:
- the insurance member or any family member while occupying any automobile, or as a pedestrian when struck by a motor
- Any other person while occupying the insurance member’s covered automobile or any vehicle (private passenger automobile or trailer licensed for road use) driven by him/her or a family member.
- The policy will pay up to the limits listed in his/her policy for each individual injured.
- The Medical Payments coverage will not provide coverage for any expenses if the injuries occur while occupying a motorized vehicle with less than four wheels.
UNINSURED/UNDERINSURED MOTORISTS (UM/UIM) COVERAGE
Uninsured Motorists (UM) Coverage will provide protection when an uninsured driver, who is at-fault, injuries insurance member or another covered individual. It also provides property damage coverage.
Underinsured Motorists (UIM) Coverage will provide protection when an underinsured driver, who is at fault, causes injury to a covered individual. An underinsured driver is one whose limits of liability are less than your UIM limits, and not enough to cover the losses of the people the underinsured driver injures in an at-fault accident.
UIM coverage does not provide protection against property damage. The UIM coverage will pay a maximum of the difference between the other driver’s Liability limits and one’s UIM limits.
Caution: The insurance company will not provide coverage if the insurance member or his/her legal representative settles the bodily injury or property damage without the company’s written consent.
Widespread use of the automobile began after the First World War in urban areas. Cars were relatively fast and dangerous by that stage, yet there was still no compulsory form of car insurance anywhere in the world. This meant that injured victims would seldom get any compensation in an accident, and drivers often faced considerable costs for damage to their car and property.
A compulsory car insurance scheme was first introduced in the United Kingdom with the Road Traffic Act 1930. This ensured that all vehicle owners and drivers had to be insured for their liability for injury or death to third parties whilst their vehicle was being used on a public road. Germany enacted similar legislation in 1939.
In many jurisdictions, it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate the insurance to both the car and the driver, however, the degree of each varies greatly.
Several jurisdictions have experimented with a “pay-as-you-drive” insurance plan which is paid through a gasoline tax (petrol tax). This would address issues of uninsured motorists and also charge based on the miles (kilometers) driven, which could theoretically increase the efficiency of the insurance, through the streamlined collection
One can also purchase additional insurance coverage in the form of endorsements. Here are the most popular.
Change to loss payment
This is also commonly referred to as “replacement cost”, this endorsement allows you to be indemnified without depreciation being calculated. In case of a total or partial loss, the insurer establishes the cost of repairing the damaged portions of one’s vehicle or replacing it, without taking into account its depreciation.
Short-term rental of a vehicle
This is a type of endorsement that covers the cost of renting a vehicle for a specific period while one’s vehicle/car is being repaired or until it is replaced, following an insured loss.
Damage to vehicles not owned by the insured
This is another type of endorsement, it provides coverage should one damage a vehicle that he/she borrowed or rented. It’s often more advantageous than the insurance offered by the rental company.
In conclusion, Automobile insurance is used to protect you against expenses you may not otherwise be able to afford if you are involved in an automobile accident, it is mandatory in the commonwealth, for as much as one has an automobile e.g cars, trucks, etc. he or she needs to apply for automobile insurance, to enjoy the outstanding benefits.