Auto Insurance, Policy Assets, and Customer Assistance
Auto insurance is a type of insurance policy that primarily pays for damage to or theft of property while the vehicle is being used. This includes replacement costs and automobile repairs as well as lost wages, medical expenses, and other damages or losses to property such as liability in an accident. The coverage typically applies to both new and used vehicles (though the amount may differ), though extended warranties are often excluded if they apply only to a certain part of the vehicle.
In general, auto insurance provides protection against financial harm arising from bodily injuries or property damage sustained during use of a motor vehicle such as an automobile, motorcycle, bus, truck, airplane or any other machinery with wheels at least 5 horsepower ( hp) per corner. It is offered by automobile insurance companies, or other insurers. It may be compulsory or optional (as with some other forms of insurance, such as fire and liability). It is typically included in the price of a car (or motorcycle) through a vehicle finance contract, although it is sometimes sold separately. The cost of the auto insurance policy depends on an automobile's risk level; for example, sports cars generally incur greater costs than family cars.
Auto insurance policies are normally subject to legal requirements under which certain minimum coverage levels must be maintained. Throughout the world, using a motor vehicle without insurance constitutes an offense. If coverage limits do not meet the mandatory legal requirements (if any), penalties can include confiscation of the motor vehicle or imprisonment. Exceptions may include only the minimum coverage limits required under an applicable statute.
Under some circumstances, auto insurance may be offered through a separate company as a non-core product for customers who are already covered by selected products included in its core offering. An example is a homeowner's policy that includes auto coverage, which is provided by the insurer through an affiliated company. The separate policy issued through the affiliate provides flexibility to the householder since auto insurance can be tailored to suit his or her particular needs without impacting any other coverages in force or affecting their rates.
Auto insurance is mandatory in almost all nations. Manufacturer's original equipment manufacturer (OEM) parts are usually excluded from auto insurance policies. With the advances in modern technology and the development of the car as a mass consumer durable, many more parts are subject to failure than in earlier decades and are often covered under warranty by their manufacturers. Worn or faulty parts not covered by warranty that still conform to specification may also be repaired, or replaced by refurbished ones at a lower cost than buying completely new components that meet current standards. Some types of insurance such as third-party liability cover any damage to the client's vehicle, no matter who is responsible. They can be paid for by the client; although it is common in some areas of the world to have them included in an annual car insurance premium.
The cost of insurance varies greatly from country to country, and from one type of vehicle to another. Insurance costs also depend on the type of policy and coverage limits selected. On average, insurance rates increase with the age of the car or other vehicle. According to a 1999 survey, it is very uncommon for modern microcars (such as electric cars and scooters) to be insured—with over half being uninsured—because their low value does not justify the cost of insurance for damage or theft.
Different auto insurance carriers offer a variety of coverages, and consumers can choose the coverage they think they need. All of these coverages are included in traditional insurance policies, whether they are standard or optional. Typically, standard auto insurance covers property damage only; optional coverage includes personal injury protection (PIP) or medical payments coverage. In some cases, multiple coverages may be combined into one policy in order to save costs for the consumer.
The general type of coverage offered by most automobile insurance companies is called liability coverage. Liability coverage pays damages for injury or damage to people or their possessions, as well as to other vehicles involved in an accident. Liability coverage is required by law in some jurisdictions, and it is offered as an option most of the time.
In the United States, liability coverage typically covers up to $100,000 or more for injury and $100,000 or more for damage to another person's property. Some auto insurance companies provide this level of protection at no extra charge when the coverage limits are increased. To calculate how much liability coverage would cost for a particular claim, one should use a formula based on the number of people involved/property damage experienced and the policy amount. The policy amount is usually based on a value of the insured vehicle, so that higher premiums may be charged for larger cars.
In the United States, liability coverage is usually limited to $50,000 or more for injury and $10,000 or more for property damage. Several states require unlimited liability coverage regardless of state law. Some states restrict unlimited liability coverage to certain vehicular classes under certain conditions; Florida and Georgia are two states which have such restrictions in place.
Personal injury protection (PIP) pays medical bills and other damages for someone injured in an accident with the insured vehicle(s), up to a preset maximum that can be set by the insurance company. This type of coverage is mandated in some states.
Medical payments coverage (often abbreviated as MedPay) pays the medical bills for the vehicle driver and passengers, up to a certain amount. This type of coverage is often required by states (such as California) that do not require PIP coverage. Additionally, some states mandate that drivers must buy medical payments coverage before they can purchase other types of bodily injury liability insurance coverage.
Underinsured motorist bodily injury (UMBI or UM/UIM) insurance offers limited protection from the remaining liability after other bodily injury liability policies have paid their share. It is a form of combined underinsured/uninsured motorist insurance (called CUM). UMBI coverage will pay a portion of the first $200,000 of bodily injury coverage paid (if any) by UM/UIM insurance.
The basic premise of UMBI is that some people purposely drive dangerous cars or trucks when other people are injured in their car, with the intention of minimizing their financial obligations to the victims because they think they are not covered by a comprehensive auto insurance policy. UMBI pays for damage to others in case the driver has an accident with someone actually covered under his or her own insurance.
Conclusion
The amount of auto insurance coverage purchased depends largely on several factors including the driving record of the policyholder, the type and age of vehicle insured, and the likelihood of an accident occurring. Auto insurance is sometimes a highly profitable benefit for a business.
Vehicle use in Western Australia has increased dramatically in recent years, with 260% growth between 1995 and 2005. As such, the number of crashes have also risen by 28% over that time period. Despite this increase in crashes however there has been a relative decline in claims and actual physical damage to vehicles since 2006, with claims decreasing by 13%, but physical damage to vehicles increasing by 14%.