Monday, February 4, 2008

Coverage levels

Vehicle insurance can cover some or all of the following items:

-The insured party
-The insured vehicle
-Third parties
Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

An excess payment, also known as a deductible, is the fixed contribution you must pay each time your car is repaired through your car insurance policy. Normally the payment is made directly to the accident repair garage when you collect the car. If one's car is declared to be a write off, the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to you.

If the accident was the other driver's fault, and this is accepted by the third party's insurer, you'll be able to reclaim your excess payment from the other person's insurance company. If the other driver is uninsured, a policy's minimum limits include coverage for the uninsured/underinsured motorist(s) at fault.

Compulsory Excess
A compulsory excess is the minimum excess payment your insurer will accept on your insurance policy. Minimum excesses vary according to your personal details, driving record and insurance company.

Voluntary Excess
In order to reduce your insurance premium, you may offer to pay a higher excess than the compulsory excess demanded by your insurance company. Your voluntary excess is the extra amount over and above the compulsory excess that you agree to pay in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by your insurer, your insurer is able to offer you a significantly lower premium.

Public policy

In many countries it is compulsory to purchase auto insurance before driving on public roads. In the United States, penalties for not purchasing auto insurance vary by state, but often involve a substantial fine, license and/or registration suspension or revocation, as well as possible jail time in some states. Usually, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle. Typically, coverage against loss of or damage to the driver's own vehicle is optional - one notable exception to this is in Saskatchewan, where SGI provides collision coverage (less than a $700 deductible, such as a collision damage waiver) as part of its basic insurance policy. In South Australia Third Party Personal insurance from the State Government Insurance Corporation (SGIC) is included in the license registration fee. South Africa allocates a percentage of the money from petrol into the Road Accidents Fund, which goes towards compensating third parties in accidents.[1] Most countries relate insurance to both the car and the driver, however the degree of each varies greatly.

In the United States, auto insurance is compulsory in most states, though enforcement of the requirement varies from state to state. The state of New Hampshire, for example, does not require motorists to carry liability insurance, while in Virginia residents must pay the state a $500 annual fee per vehicle if they choose not to buy liability insurance.[2]

A 1994 study by Jeremy Jackson and Roger Blackman[3] showed, consistent with the risk homeostasis theory, that increased accident costs caused large and significant reductions in accident frequencies.