Repairs and replacement costs of vehicles can be expensive, and in the case of an accident, you might have to cover for a third party as well as look out for damages to your car or property. This is why in many countries, having vehicle insurance is compulsory.
This is significant because it provides financial protection in case of accidents. Having vehicle insurance coverage can protect you from financial losses and help you to recover accidental damages to your car. In this article, you will get insights into the basics of insurance coverage that you need to know.
Things to Know About the Basics of Vehicle Insurance Coverage
1. Types of Car Insurance
Knowing the types of car insurance is significant to select the right kind of policy for your vehicle. Car insurance is typical of three types fully comprehensive, third-party, and third party, fire and theft. Each offers different types of coverage from accidental damages and repairs and replacement costs. Besides, here are a few reasons why vehicle insurance is a must.
- Fully comprehensive provides you with coverage claims against repair charges after being in an accident, any kind of accidental damages while traveling, or in case of vandalism. Fully comprehensive insurance generally covers all kinds of damages to your car and offers the utmost level of protection providing coverage for everyone involved in the accident including you, your vehicle, and other people involved in the accident. This type of insurance covers all the features of third-party, fire, and theft as well as pays for any kind of damage to your vehicle.
- Third-party insurance only offers coverage to other people and pays for any kind of damages or injury to their car or property. It is the minimum level of insurance coverage and does not provide any protection to your vehicle or property. However, this type of insurance does not offer a no-claim bonus. Besides, this is an ideal option if you live in an area with a high crime rate and involve other kinds of risk to your vehicle.
- Third-party, fire, and theft offers the same coverage as third-party besides, it also covers any kind of repairs to your vehicle from fire or theft.
2. No-Claim Bonus
No-claim bonus is a discount the insurance company provides in exchange for your policy value if you don’t claim your policy. The discount amount typically increases each year as the insurer doesn’t make the claim. The percentage of the discount within one year of the policy is typically around 30 percent. This increases every year and the insurer can claim up to 65 percent of the bonus at the end of five years.
However, if you claim more than one accidental damage in a single year, you will no longer be entitled to a no-claim bonus. Most insurance companies offer an add-on service so that insurers can protect the no-claim bonus even after claiming for accidental damage. No-claim discount protection will allow you to enjoy a no-claim bonus along with claiming accidental damages for repairs and replacements.
3. Understand the Coverage Limits
Insurance claim coverage doesn’t cover all the costs for repairs or replacements in case of accidental damage to you or the third party. Understanding the coverage limits can help you to determine the highest possible coverage you can claim from the insurance company in case of any accidental damage based on the type of policy.
If the cost associated with repairs or replacement is higher than the coverage limits as per the terms of the contract, the insurer will be entitled to receive compensation equal to the amount specified as per the coverage limits. The insurer is responsible to bear expenses that exceed the coverage limits. Insurance policy with high coverage limit can be expensive but if provides more financial protection at the time of accidents.
Tips to Lower your Cost of Vehicle Insurance Coverage
1. Increase the security of your vehicle
Keeping your car safe at all times is essential especially if you have a low coverage limit. Buying a new car is not an ideal option if your coverage limit is lower than the value of buying a new car. You can also eliminate most of the insurance costs by keeping your vehicle secure.
2. Keep a Check on your Mileage
The value of your annual premium of the insurance policy can be higher if your annual mileage is also high. The more you drive, the more premium you might have to pay. This typically differs based on the type of policy and the terms and contracts of different insurance companies.
3. Understand the Terms of the Contract
Understanding the terms of the contract of your vehicle insurance coverage is significant to be aware of the insurance claims and coverage limits from your policy. Different insurance providers have different terms and clauses that determine the claimable amount for repairs or replacement in case of an accident. Some general terms and conditions might be similar but a few minor clauses can make a difference at the time of insurance claims.
4. Consider the Add-on Services
There are multiple add-on services that are often included with vehicle insurance coverage. These services are often not required by everyone but can make your annual premium expensive. Evaluating the add-on services can help you to have affordable vehicle insurance coverage. Besides, many add-on services are often available at much cheaper prices if you find them elsewhere.
In conclusion, understanding your vehicle insurance coverage is significant to cover the financial losses and damages to your car in case of accidental damages, fire, or theft. Make sure to make an informed decision when selecting your coverage limits. It is better to keep the coverage value less if you live in a safe location where accident rates are lesser and have a low crime rate. Besides, a no-claim discount protection service can be useful if you want to avail no-claim bonus. Follow these tips to save the cost of your vehicle insurance coverage. However, it is important to drive safely and prevent accidents at all costs.