Auto coverage insurance
Insurance is basically a form of risk management that is used to avoid the risk of a conditional loss. It can also be defined as the transfer of risk of a loss from one form to another, in exchange for a premium. Insurance has paved way for the evolution of a separate field of study known as Risk Management. Though insurance risks are of several types they have certain basic common characteristics.
1. Large number of homogenous exposure units:- Most of the Insurance policies are targeted at a large class of people. Automobile insurance is known to encompass 175 million people in the US as of 2004. The presence of a large number of homogenous exposure units is highly beneficial to the insurers. This is because as the number of units increase, the actual result tends to come close to the expected results. There are however a few exceptions, Lloyds is an insurance firm in London that is famed for providing health insurance to celebrities.
2. Definite Loss:- The event that that is subject to the insurance, should occur in definite terms at a known time and from a known cause.
3. Accidental Loss:- The event should be accidental, and should not be within the control of the beneficiary.
4. Large loss:- The magnitude of the loss must be meaningful, at least from the insurers perspective.
5. Affordable Premium:- In the instance that the possibility of the insured event occurring is high, and the resulting premium is large as compared to the amount of protection offered, it is unlikely that the insurance will have takers. Hence the policy needs to reasonable and useful to the insurer.
6. Calculable Loss:- The probability of loss and attendant cost for insurance must be at least estimable, if not calculable.
Auto insurance can cover the insured party, the vehicle and third parties. However, varied policies specify the circumstances under which each item is insured. For auto insurances an excess payment, commonly termed as Deductible is charged which is a fixed payment you will have to make each time the car is repaired through the car insurance policy. The payment is normally paid to the repair garage when you collect your car after the accident. In the event the accident was due to another drivers fault who also accepts the same, then you can collect the excess payment from the other persons insurance company.
In the US auto owners are protected by liability, collision and comprehensive coverages. Liability coverage pays a fixed amount of money for damages caused due to accidents in which the insured driver becomes legally liable to pay. They are of two types of insurance namely combined single limit and split limit insurance. Combined Single limit insurance combines the liability of property and bodily injury into a single limit. Split limits insurance deals with them separately. Collision coverage is subject to a deductible amount, and pays for the insured vehicle involved in the accident. Collision coverage is optional and is commonly referred to as Collision Damage Waiver (CDW).
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