Coverage Types Of American Auto Insurance Policies
Millions of people became injured due to auto accidents. The latter has also emerged as one of the leading causes of mortality worldwide. The costs arising from damages to property also amounted to billions. To ensure that someone will shoulder the costs arising from these, many states require vehicle owners and drivers to acquire American auto insurance as proof of financial responsibility. This proof should be presented by a licensed driver whenever a law enforcement officer asks for it, when he figures in an auto accident, when he registers or renews vehicle registration and when a vehicle gets inspected. When purchasing an American auto insurance policy, it will benefit consumers to become familiar with common insurance terms. The term collision, for example, refers to the portion of an auto insurance policy which pays for vehicle damage caused by an auto accident regardless of whose fault the accident is. If another party is held liable for damage to a vehicle, it is the responsibility of the insurance company to make the insurance company of the other party pay. Usually, the amount of collision liability coverage is equal to the depreciated value of a vehicle. On the other hand, a comprehensive type of American auto insurance policy refers to the portion of a policy which pays for vehicle damage due to theft, vandalism, natural disasters, storms, and others. Medical coverage meanwhile, pays for initial medical bills for the policy holder or his family or passengers in his vehicle. If expenses for medical treatment exceeded medical coverage, non-family passengers can avail of liability coverage. Liability is another coverage that pays for bodily injury or property damage caused by a vehicle driven by the policy holder. This liability coverage does not cover for injuries to family members riding in the vehicle since this is covered already by the previous type of coverage. Many states have set minimum limits for this type of coverage. Uninsured motorist is an American auto insurance coverage that pays for property damage and injuries incurred from an auto accident that is caused by an uninsured driver. This also covers costs arising from hit-and-run accidents. Underinsured motorist is another type of American auto insurance coverage that kicks in when the liability limit of the insurance policy of another party is already exhausted. Lastly, gap insurance covers for the difference between the amounts paid under collision or comprehensive coverage so that total loss or amount to pay off the lease or contract balance is settled. Without gap insurance, the policy holder will be liable for the difference between the payoff amount on the vehicle and the payout amount from comprehension and collision coverage.
Some states in the United States also follow the no-fault system instead of the tort system. In a no-fault system, the insurance company pays for all personal injury claims regardless of whose fault an auto accident is. This system was designed to reduce American auto insurance rates this reduces claims and litigations costs. Generally, vehicle owners and drivers with a clean driving record can avail of low auto insurance rates. The opposite is true for drivers who have a history of many traffic citations, or crashes since they are considered as high insurance risks. |