Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy. Auto insurance provides property, liability and medical coverage:
- Property coverage pays for damage to or theft of your car.
- Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
- Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.
An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements. Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.
A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.
When people hear the word "comprehensive," they might think "all-encompassing"— but in car insurance terms, the word has a different meaning. Simply put, comprehensive coverage protects you against damages to your car that are the result of covered perils not related to a collision.
Simply put, comprehensive coverage protects you against damages to your car that are the result of covered perils not related to a collision. Think of a scenario that could cause damage to your car that has nothing to do with striking another vehicle. In many cases, this can include: Theft. Vandalism.
There are three common types of cover available to you. Each has its own benefits – and comes with its own price tag:
- Third-party only
- Third-party, fire and theft
- Comprehensive
When getting an insurance quote, it’s worth looking at how much it costs to insure your car for each level of cover before you buy.
It’s good to save money, but it’s also good to strike a balance between how much you pay and how much protection you get. Don’t compromise on cover just to save a few quid.
Third-party only
This is the most basic level of cover, and the bare minimum required by law. All three policy types have this.
If you cause a road accident and someone else is injured or their car is damaged, it’s not fair for them to have to pay out of their own pocket to fix this.
This is where third-party cover comes into play, which covers:
- Damage to other vehicles
- Injury to other people and animals
- Damage to property
You aren’t covered for damage to your own car, or any injuries you sustain after an accident that’s deemed to be your fault. That’s coming out of your own pocket.
Third-party, fire and theft
A third-party, fire and theft policy has all the benefits of a third-party policy, but with one or two extras.
As the name suggests, the policy offers extra protection for your car if it’s stolen or catches fire.
This kind of policy may also cover you for damage that happens as the result of an attempted theft, eg if a thief breaks your window to steal your stereo.
Comprehensive cover
This level of cover gives you all the benefits of third-party, fire and theft, but with a few added extras.
For one, a comprehensive policy covers damage to your own car, even if an accident is deemed to be your fault.
Comprehensive policies also tend to have cover for windscreen damage.
Some insurers may also throw in a courtesy car with comprehensive policies, but not all of them do.
It’s a commonly-held belief that comprehensive policies are the most expensive to buy, since they offer the most benefits.
This isn’t always the case. Higher-risk drivers tend to go for third-party policies as a means of lowering their costs. As a result, the cost of third-party policies go up.
Although many people refer to comprehensive insurance as “fully comp”, it may not offer absolutely everything.
For example, breakdown cover might not come as standard on most policies, so you’ll have to pay extra if you want all the bells and whistles.
