Auto Insurance Primer
What is auto insurance? Auto insurance (or car insurance, motorinsurance) is insurance consumers can purchase for cars, trucks,and other vehicles. Its primary use is to provide protectionagainst losses incurred. By buying auto insurance, depending onthe type of coverage purchased, the consumer may be protectedagainst: * The cost of repairing the vehicle following an accident * Thecost of purchasing a new vehicle if it is stolen or damagedbeyond economic repair * Legal liability claims against thedriver or owner of the vehicle following the vehicle causingdamage or injury to a third party.Liability insurance covers only the last point, whilecomprehensive insurance covers all three. Even comprehensiveinsurance, however, doesn't fully cover the risk associated withbuying a new car. Due to the sharp decline in value immediatelyfollowing purchase, there is generally a period in which theremaining car payments exceed the compensation the insurer willpay for a "totaled" (destroyed, or written-off) vehicle.So-called GAP insurance was established in the early 1980's toprovide protection to consumers based upon buying and markettrends. The escalating price of cars, extended term auto loans,and the increasing popularity of leasing gave birth to GAPprotection. GAP waivers provide protection for consumers when a"gap" exists between the actual value of their vehicle and theamount of money owed to the bank or leasing company. In somecountries including New Zealand and Australia market structuresmean that people are more likely to buy a nearly new car than anew car so this is less of a problem.In the United States, liability insurance covers claims againstthe policy holder and generally, any other operator of theinsured's vehicle, provided they do not live at the same addressas the policy holder and are not specifically excluded on thepolicy. In the case of those living at the same address, theymust specifically be covered on the policy. Thus it is necessaryfor example, when a family member comes of driving age they mustbe added on to the policy. Liability insurance generally doesnot protect the policy holder if they operate any vehicles otherthan their own. When you drive a vehicle owned by another party,you are covered under that party's policy. Non-owners policiesmay be offered that would cover an insured on any vehicle theydrive. This coverage is available only to those who do not owntheir own vehicle.Generally, liability coverage does extend when you rent a car.However, in most cases only liability applies. Any additionalcoverage, such as comprehensive policies, i.e. "full coverage"may not apply. Full coverage premiums are based on, among otherfactors, the value of the insured's vehicle. This coverage maynot apply to rental cars because the insurance company does notwant to assume responsibility for a claim greater than the valueof the insured's vehicle, assuming that a rental car may beworth more than the insured's vehicle. Some states, such asMinnesota, may require that it extend to rental cars. Mostrental car companies offer insurance to cover damage to therental vehicle. In some regions, the costs associated with nothaving access to the vehicle ("Loss of Use") is also covered.More information at autoinsurance
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