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What is Automobile Insurance

5. What are the common types of insurance coverage?

Individuals may purchase insurance coverage for nearly any foreseeable risk. The following are common types of insurance policies:

•    Automobile Insurance – Vehicle insurance covers damages suffered by either the individual or automobile pursuant to any number of risks. Common risks covered in vehicle insurance policies include the following:

⁃    Liability Coverage – This type of policy covers, up to the policy amount, the costs and damages suffered by third parties as a result of operating the insured vehicle.

⁃    Note: This type of vehicle insurance coverage is mandatory in every state.

⁃    Collision Coverage – This is a form of property insurance that will pay the value of the damages suffered to a vehicle in a crash, up to a stated amount or up to the total value of the vehicle.

⁃    Note: This type of insurance is generally required by a lender when purchase of a vehicle is financed?

⁃    Comprehensive Coverage – This type of insurance coverage insures the vehicle against forms of damage other than collision, such as vandalism, theft, hazardous weather, etc.

⁃    Uninsured (& Underinsured) Motorist Coverage – This type of insurance coverage provides  indemnification for injuries suffered by the driver and passengers of the covered automobile when another party without insurance causes personal injury in a crash.

⁃    Note: It also covers situations where a third party causing the damage or harm is unidentifiable. This type of coverage is mandated in many states.

⁃    Other Coverage – Other insurance coverage in a vehicle policy may include towing and rental car expenses, additional medical payment coverage, and accidental death coverage.

⁃    Discussion: Why do you think there are so many special types of coverage applicable to ownership and operation of a vehicle? How does the cost-benefit vary with each type of vehicle insurance?

⁃    Practice Question: Donald is purchasing a new car. He is financing the car through his bank. What types of insurance will Donald likely have to purchase?

 

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