A Guide to Auto Insurance

Need and Importance

If you own a car, you probably already know a little about car insurance. There is a legal requirement that you must have at least some kind of third party liability insurance to be legal on roads. The scope of this cover is to pay compensation for death of or bodily injuries to third parties, while the Insured is treated as the first party and the Insurance Company second party, all others would be third parties.

Before purchasing auto insurance, you must consider a variety of factors including what kind of car you have, your driving record and the amount of money you are willing to pay. Understanding the simple basics of auto insurance will make you confident that the car insurance policy you choose will take care of your needs in the event of an accident.

Types of Insurance

1) Comprehensive Insurance
This is the widest form of cover; the policyholder is protected against financial losses of all kinds, accidental loss to vehicle, theft of car and third party liability claims.

2) Third Party Motor Vehicle Insurance
This cover protects the policyholder from all financial losses arising due to accidental damage liability of all forms to third party, property damage or bodily injury, death or both.

3) Act only Liability Insurance
This cover meets the minimum legal insurance requirement. In this cover the policyholder is protected against financial losses due to liability of accidental bodily injury or death to third party.

Tips on Buying Right:

What to look for before purchasing a Car Insurance Policy Firstly as soon as a car is purchased, the owner must buy an insurance cover. If a used car is purchased, the new owner needs to know that the cover of the previous owner is null and void, as it is non‐transferable. The insured value or sum insured depends on the market value of the vehicle. Underinsurance or over‐insurance occurs when this value is not correctly mentioned.

Over insurance occurs when sum insured is higher than the market value, maximum compensation is the market value of the vehicle. Under insurance occurs if sum insured is less than the market values, you are as self‐insuring the difference. In the event of a loss, you will only be partially compensated.