What Is Auto Insurance?

What Is Auto Insurance?

In an age wherein lots of investments and uncertainties coexist, providing security to all your investments is necessary. This security usually comes in the form of insurance. Insurance is defined as a contract of compensation for certain losses in exchange for a payment done periodically. It is made so as to protect the financial status of an individual or a group of people in case of an unexpected loss.

There forms of insurances that are mandated by law while others are deemed optional. Agreement to the terms of an insurance policy is required between the insurer and the one to be insured. Premiums are the payments made by the insured. A sum of money will be given to the policy holder once an unexpected incidence occurs. Forms of insurance include auto insurance, life insurance, health insurance and business insurance.

Let’s talk about auto insurance.

Auto insurance is basically an insurance bought or purchased for your own vehicle like trucks, cars and motorcycles. It protects you from financial loss in case an accident occurs. You create a contract with an insurance company. You pay premiums and the insurance company, in return, agrees to pay the losses as declared in the policy. The amount of insurance premium can be dictated by the government or made by the insurance company. If dictated by the insurance company, your premium will be computed based on actuaries or statistical data.

In short words, you are the policy holder and you are being provided with certain coverage by paying your premiums.
Auto insurance gives different types of coverage. Usually, we have:

  • Medical coverage which pays for the cost of hospitalization, treatment of injuries and rehabilitation expenses.
    • Liability coverage which pays for the legal responsibility held when damage to others were done.
    • Property coverage which pays for the damage incurred upon theft of your vehicle.

Auto insurance can cover some or all of the following:
• The policyholder
• The vehicle
• Third parties involved like physical injuries to other people and damage to others’ property (car and people, property damage and bodily injury)

Different insurance policies would indicate or specify the items they will cover. Well, in reality, most of insurance companies would not really cover all these items. It’s usually a case-to-case basis.

Getting auto insurance can be of great help to people, especially to those who own a vehicle. However, people who would like to have one must be cautious and critical in choosing their insurance. Accidents can happen anytime and it is good if we have an insurance we can count on anytime.