There are many different types of car insurance. Some are very basic policies intended to provide the minimum car insurance coverage as required by law for a low cost, while others are considerably more encompassing and thus more expensive. A car insurance does not just cover others damages, it also covers your own cars damages. If you bought an expensive car that you have a down payment on, you do not want your car to be damaged so it gets lower value then your debts. With the right insurance you make sure you get your car repaired without having to pay huge amounts of repair costs.
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A car can not only be damaged, destroyed or stolen – it can also be involved in situations where other property is damaged and/or where people are injured or killed. This is why most jurisdictions require cars to be insured. When the use of the automobile began to rise in the 1920s, it soon became clear that those who fell victim to a car collision often went without proper compensation since the driver or owner of the vehicle could not pay or found various ways of delaying payment. As early as 1930, the United Kingdom enacted a law that made it compulsory for cars to be insured against third-party liability.
Today, many car owners opt for a more comprehensive car insurance policy than just third-party liability protection, since they themselves also want to be protected in case of damage, theft, injury, etc. With a good comprehensive car insurance policy, you can be involved in a car accident and get a new car paid for by the insurance company (minus the deductible). The car insurance can also cover necessary health care costs, give you disability compensation, and more.
Here are just a few examples of points that you need to take a closer look at when you compare different car insurance polices:
- Insurance cover for the insured party
- Insurance cover for passengers in the car. Will their cover depend on if the driver was at fault or not?
- Third-party cover
- Cap for property damage
- Cap for medical costs, disability compensation, etc
- Accidental death coverage
- Cover for damage to the insured car
- Cover for damage to items in or on the insured car
- Cover for items on a trailer, in a travel trailer, etc pulled by the insured car
- Damage caused by fire
- The cost of renting a car while your car is damaged
- The cost of towing
- Loss of income due to car crash
- Accidents involving uninsured motorists
Car insurance in the United States
In the United States, car insurance is regulated on a state-level. Each of the U.S. states and territories have their own car insurance regulation. For example, the minimum requirement for bodily injury liability coverage in Alaska is 100,000 USD but only 20,000 USD in Florida.
Car insurance in the United Kingdom
As mentioned above, third-party personal injury car insurance was made mandatory in the United Kingdom as early as the 19030s. Today, the UK law that regulates car insurance is the Road Traffic Act 1988.
Motorists in the United Kingdom have two options to fulfill the requirements of this law:
- Have adequate car insurance for liability.
- Keep a specified deposit with the Accountant General of the Supreme Court. At the time of writing, this deposit must be £500,000.
Since June 2011, a car in the United Kingdom must be continuously covered, which means that it must be covered whether or not it is kept on public roads and whether or not it is driven. The new regulation is called Continuous Insurance Enforcement (CIE). It is however still possible to “lay up” a vehicle and be exempt for the cover requirement, but this requires a Statutory Off Road Notification (SORN).
A car that doesn’t fulfill the legal requirement (insurance or deposit) can be instantly seized by the police. The driver can be prosecuted and convicted and receive either a fixed penalty or a magistrate’s courts penalty. The police in the United Kingdom utilizes automated number plate recognition technology to quickly check plates against the Motor Insurance Database and detect vehicles without sufficient coverage.
Third party only car insurance
Third party only insurance is enough to satisfy the legal requirements, but will only cover liabilities to third parties.
Third party, fire and theft
This is a popular car insurance policy type in the United Kingdom for those who can’t afford or doesn’t want comprehensive car insurance, but still want a better cover than the one offered by a third party only car insurance policy. A car insurance policy of the type “third party, fire and theft” covers not only liabilities to third parties, but will also pay out to the owner of the car if the car is stolen or damaged by fire (conditions apply). Some policies will cover vandalism, while others wont.
Comprehensive car insurance
Comprehensive car insurance includes both third party liability coverage and cover for damage to the car caused by the driver. It will typically also cover vandalism and certain other types of damage.
In the UK, it is not uncommon for comprehensive car insurance policies to be marketed as “Fully Comprehensive” or “Fully Comp”. This doesn’t mean that the policy is better than a policy marketed simply as comprehensive – it is just verbose marketing language. Always check the policy in detail to find out exactly what it covers.