Vehicle Insurance: 20 tricky facts about car insurance

Billy

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Introduction

If you own or drive a vehicle, you probably know that vehicle insurance is not only a legal requirement but also a smart way to protect yourself, your vehicle, and other people on the road. Vehicle insurance can provide financial compensation for damages or injuries caused by traffic accidents, theft, vandalism, fire, natural disasters, or other unforeseen events.

However, not all vehicle insurance policies are created equal. There are different types of vehicle insurance, each with its own coverage, benefits, limitations, exclusions, costs, and payment options. Choosing the right vehicle insurance for your needs can be confusing, overwhelming, or even daunting.

That’s why we have created this comprehensive guide to help you understand the basics of vehicle insurance, compare different options, save money on premiums, make claims smoothly, and avoid common pitfalls. By reading this guide, you will learn:

  • What is vehicle insurance and why do you need it?
  • What are the different types of vehicle insurance?
  • How to choose the right vehicle insurance for your needs?
  • How to save money on vehicle insurance premiums?
  • How to make a vehicle insurance claim?
  • How to avoid common vehicle insurance pitfalls?

Let’s get started!

Vehicle Insurance Basics

Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is a type of insurance that covers cars, trucks, motorcycles, and other road vehicles. Its primary purpose is to provide financial protection against physical damage or bodily injury resulting from traffic collisions and against liability that could also arise from incidents in a vehicle. 

Vehicle insurance may also offer financial protection against theft of the vehicle, and against damage to the vehicle sustained from events other than traffic collisions, such as keying, weather or natural disasters, and damage sustained by colliding with stationary objects. 

The specific terms of vehicle insurance vary with legal regulations in each region. In this section, we will discuss the two main types of vehicle insurance: compulsory third-party liability insurance and comprehensive and third-party property damage insurance.

Compulsory third-party liability insurance

Compulsory third-party liability (CTP) insurance is a type of vehicle insurance that is mandatory in most countries. It covers the vehicle owner and any person who drives the vehicle against claims for liability for death or injury to people caused by the fault of the vehicle owner or driver. CTP insurance does not cover damage to the vehicle or property of the insured or the third party.

What does it cover and what are the benefits?

CTP insurance covers the following:

  • Medical expenses for the injured third party
  • Loss of income for the injured third party
  • Pain and suffering for the injured third party
  • Legal fees for the insured if sued by the third party
  • Funeral expenses for the deceased third party

The benefits of CTP insurance are:

  • It fulfills the legal requirement to drive a vehicle on public roads
  • It protects the insured from financial ruin in case of a serious accident involving a third party
  • It reduces the burden on the public health system and social welfare programs

What are the limitations and exclusions?

CTP insurance has the following limitations and exclusions:

  • It does not cover damage to the vehicle or property of the insured or the third party
  • It does not cover injury or death of the insured or passengers in the vehicle
  • It does not cover liability for accidents that occur outside the country or region where the policy is issued
  • It does not cover liability for accidents that involve intentional, criminal, or fraudulent acts by the insured or driver
  • It does not cover liability for accidents that involve driving under the influence of alcohol, drugs, or medication
  • It does not cover liability for accidents that involve racing, speed testing, or illegal activities

How much does it cost and how to pay for it?

The cost of CTP insurance depends on various factors, such as:

  • The type, make, model, and age of the vehicle
  • The engine size, power, and fuel type of the vehicle
  • The location, usage, and mileage of the vehicle
  • The age, gender, driving history, and claims record of the owner and driver
  • The level of coverage and excess (the amount that the insured has to pay before the insurer pays) chosen by the insured

CTP insurance can be paid in different ways, such as:

  • As part of vehicle registration fees (in some countries or regions)
  • As a separate annual or monthly premium (in some countries or regions)
  • As a lump sum payment at the time of purchase or renewal of the policy

Comprehensive and third-party property damage insurance

Comprehensive and third-party property damage (TPPD) insurance is a type of vehicle insurance that is optional in most countries. It covers damage to the vehicle and property of the insured and the third party caused by traffic collisions or other events.

Comprehensive insurance covers both TPPD and damage caused by fire, theft, vandalism, weather, natural disasters, or collision with animals. TPPD insurance covers only damage caused by traffic collisions.

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What does it cover and what are the benefits?

Comprehensive insurance covers the following:

  • Damage to the vehicle and property of the insured caused by traffic collisions or other events
  • Damage to the vehicle and property of the third party caused by traffic collisions
  • Theft or attempted theft of the vehicle or its parts
  • Fire, explosion, lightning, storm, hail, flood, earthquake, landslide, or other natural disasters that damage the vehicle
  • Vandalism, riot, civil commotion, malicious acts, or terrorism that damage the vehicle
  • Collision with animals that damage the vehicle
  • Towing, storage, repair, or replacement costs for the vehicle
  • Personal belongings in the vehicle that are damaged or stolen

TPPD insurance covers only damage to the vehicle and property of the third party caused by traffic collisions.

The benefits of comprehensive and TPPD insurance are:

  • It provides financial security for repairing or replacing your own vehicle in case of an accident or other event
  • It covers damage to your own vehicle that is not covered by CTP insurance
  • It covers damage to other people’s vehicles and property that you are liable for in case of an accident
  • It may offer additional features such as roadside assistance, rental car reimbursement, windshield repair, gap coverage, etc.

What are the limitations and exclusions?

Comprehensive and TPPD insurance have similar limitations and exclusions as CTP insurance. Additionally,

Comprehensive insurance has these limitations and exclusions:

  • It does not cover wear and tear, depreciation, mechanical breakdowns, electrical failures, or defects in your own vehicle
  • It does not cover damage to your own vehicle that occurs while it is being driven by someone who is not authorized by you or your insurer
  • It does not cover damage to your own vehicle that occurs while it is being used for commercial purposes (unless specified in your policy)
  • It does not cover damage to your own vehicle that exceeds its market value (unless you have agreed value coverage)
  • It may have a higher excess than TPPD insurance

TPPD insurance has these limitations and exclusions:

  • It does not cover any damage to your own vehicle (you need comprehensive insurance for that)
  • It may have a lower coverage limit than comprehensive insurance (you may have to pay the difference if the damage exceeds the limit)

How much does it cost and how to compare quotes?

The cost of comprehensive and TPPD insurance depends on similar factors as CTP insurance, plus:

  • The value of your own vehicle and the level of coverage you choose
  • The security features and anti-theft devices installed in your vehicle
  • The parking location and garage availability for your vehicle
  • The frequency and duration of your vehicle usage
  • The optional add-ons and extras you select

Comprehensive and TPPD insurance can be paid in similar ways as CTP insurance, plus:

  • As a single payment or installment plan with your insurer
  • As a credit card payment or direct debit from your bank account

To compare quotes for comprehensive and TPPD insurance, you can use online tools, such as AutoQuote Explorer ®, that allow you to enter your vehicle and personal details, select your desired coverage and features, and get instant quotes from different insurers.

You can also contact insurers directly by phone, email, or website, or visit their offices or agents. When comparing quotes, make sure you are comparing apples to apples, i.e., the same level of coverage, excess, features, and benefits.

Optional add-ons and extras

Optional add-ons and extras are additional features or benefits that you can choose to add to your vehicle insurance policy for an extra cost. They are designed to enhance your coverage, convenience, or peace of mind. However, they are not essential or mandatory, and you should weigh their costs and benefits carefully before adding them.

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What are some common add-ons and extras?

Some common add-ons and extras are:

  • Roadside assistance: This provides you with emergency services such as towing, battery jumpstart, flat tire change, fuel delivery, lockout service, etc., if your vehicle breaks down or has a problem on the road.
  • Rental car reimbursement: This pays for the cost of renting a car while your vehicle is being repaired or replaced after an accident or other event covered by your policy.
  • Windshield repair: This covers the cost of repairing or replacing your windshield if it is cracked or chipped by a stone or other object.
  • Gap coverage: This pays the difference between the market value of your vehicle and the amount you owe on your loan or lease if your vehicle is totaled or stolen.
  • New car replacement: This replaces your vehicle with a new one of the same make and model if your vehicle is totaled or stolen within a certain period of time after purchase (usually one or two years).
  • Custom parts and equipment: This covers the cost of repairing or replacing any custom parts or equipment that you have installed in your vehicle, such as stereo systems, navigation systems, alloy wheels, spoilers, etc.
  • Personal injury protection: This covers the medical expenses, lost income, funeral expenses, etc., for you and your passengers regardless of who is at fault in an accident.
  • Uninsured/underinsured motorist: This covers the damage or injury caused by a driver who has no insurance or insufficient insurance to pay for your claim.

What are the advantages and disadvantages of adding them?

The advantages of adding optional add-ons and extras are:

  • They provide more coverage and protection for your vehicle and yourself in case of an accident or other event
  • They offer more convenience and comfort for you in case of a breakdown or problem with your vehicle
  • They give you more peace of mind and confidence when driving your vehicle

The disadvantages of adding optional add-ons and extras are:

  • They increase the cost of your vehicle insurance premium
  • They may not be worth it if you rarely use them or if they are already covered by other sources (such as your credit card, manufacturer’s warranty, etc.)
  • They may have limitations and exclusions that reduce their value or applicability

How to decide which add-ons and extras are worth it?

To decide which add-ons and extras are worth it for you, you should consider the following factors:

  • Your budget: How much can you afford to pay for your vehicle insurance premium? How much can you save by choosing a higher excess or lower coverage? How much can you spend on optional add-ons and extras?
  • Your vehicle: What is the value, age, condition, and usage of your vehicle? How likely is it to be damaged, stolen, or broken down? How much would it cost to repair or replace it? How much do you depend on it for your daily activities?
  • Your risk: How often do you drive your vehicle? Where do you drive it? How safe are the roads and drivers in your area? How good are you at driving? How prone are you to accidents or problems with your vehicle?
  • Your preference: What are your priorities and expectations when it comes to vehicle insurance? What are the features and benefits that matter most to you? What are the trade-offs that you are willing to make?

Based on these factors, you can compare the costs and benefits of different add-ons and extras and decide which ones are worth it for you. You can also use online tools, such as AutoQuote Explorer ®, that allow you to customize your policy and see how different add-ons and extras affect your premium.

Vehicle Insurance Tips and Tricks

Now that you have learned the basics of vehicle insurance, you may be wondering how to get the best deal and service from your insurer. In this section, we will share some tips and tricks that can help you save money on premiums, make claims smoothly, and avoid common pitfalls.

How to save money on vehicle insurance premiums?

Vehicle insurance premiums can vary widely depending on various factors, such as your vehicle, your location, your driving history, your coverage, your excess, and your insurer. However, there are some ways that you can reduce your premium or get discounts, such as:

  • Choose a higher deductible or excess: This is the amount that you have to pay before your insurer pays for your claim. By choosing a higher deductible or excess, you can lower your premium, as you are taking more risk and responsibility for your vehicle. However, make sure that you can afford to pay the deductible or excess in case of a claim.
  • Drive safely and avoid claims: This is the most obvious and effective way to save money on vehicle insurance premiums. By driving safely and avoiding accidents, violations, or claims, you can maintain a good driving record and a low risk profile. This can qualify you for lower premiums, as well as no-claim bonuses or discounts from your insurer.
  • Bundle your policies and get discounts: This is another common way to save money on vehicle insurance premiums. By bundling your policies, such as vehicle insurance, home insurance, life insurance, etc., with the same insurer, you can get discounts or special offers from them. This can also simplify your payments and claims process, as you only have to deal with one insurer.

How to make a vehicle insurance claim?

Making a vehicle insurance claim can be a stressful and complicated process, especially if you are involved in a serious accident or incident. However, there are some steps that you can follow to make it easier and smoother, such as:

  • Report the incident to the police and your insurer as soon as possible: This is the first and most important step to make a vehicle insurance claim. You should report the incident to the police within 24 hours or as required by law in your area. You should also report the incident to your insurer within the time limit specified in your policy (usually 48 hours or 7 days). This will help you establish the facts and evidence of the incident, as well as prevent any delays or disputes in your claim.
  • Gather evidence and information from the scene of the accident: This is another crucial step to make a vehicle insurance claim. You should gather as much evidence and information as possible from the scene of the accident, such as:

    • The names, addresses, phone numbers, license numbers, registration numbers, and insurance details of all parties involved in the accidentThe names, addresses, phone numbers, and statements of any witnesses to the accidentThe location, date, time, weather conditions, road conditions, traffic signs, and speed limits of the accidentThe damage to your vehicle and any other vehicles or property involved in the accidentThe injuries to yourself and any other people involved in the accidentThe police report number and officer’s name

    You should also take photos or videos of the scene of the accident, the damage to your vehicle and any other vehicles or property involved in the accident, the injuries to yourself and any other people involved in the accident, and any other relevant details. You should keep these evidence and information safe and handy for your claim.
  • Follow the instructions from your insurer and cooperate with them: This is the final step to make a vehicle insurance claim. You should follow the instructions from your insurer regarding how to submit your claim form and supporting documents (such as evidence, information, receipts, invoices, etc.). You should also cooperate with them regarding any questions they may have about your claim or any investigations they may conduct about your claim. You should be honest and accurate in providing them with any information they request. You should also keep track of your claim status and progress with them.

How to avoid common vehicle insurance pitfalls?

Vehicle insurance can be a complex and confusing product that may have some pitfalls that can cost you money or cause you trouble. Here are some common vehicle insurance pitfalls that you should avoid:

  • Not reading the policy document carefully and understanding what is covered and what is not: This is one of the most common vehicle insurance pitfalls that can lead to disappointment or disputes when making a claim. You should read the policy document carefully before signing it and understand what is covered and what is not covered by your policy. You should also check for any limitations,exclusions, conditions, or clauses that may affect your coverage or claim. You should also ask your insurer or agent for any clarifications or explanations if you have any doubts or questions about your policy.
  • Not updating your insurer about any changes in your circumstances or vehicle details: This is another common vehicle insurance pitfall that can invalidate your policy or reduce your coverage. You should update your insurer about any changes in your circumstances or vehicle details, such as:

    • Moving to a new address or changing your parking locationChanging your vehicle usage or mileageAdding or removing drivers from your policyModifying or upgrading your vehicle or installing custom parts or equipmentRenewing or canceling your vehicle registration or license

    You should update your insurer as soon as possible after any changes and get a confirmation from them that they have updated your policy accordingly. You should also check if any changes affect your premium or coverage and adjust them if necessary.
  • Not reviewing your policy regularly and shopping around for better deals: This is another common vehicle insurance pitfall that can make you pay more than you need to or miss out on better deals. You should review your policy regularly (at least once a year) and check if it still meets your needs and expectations. You should also shop around for better deals from different insurers and compare their quotes, coverage, features, and benefits. You may be able to find a cheaper or better policy that suits your needs and budget. However, you should not switch insurers without considering the pros and cons of doing so, such as:
    • The cancellation fees or penalties that you may have to pay to your current insurer
    • The waiting period or exclusions that may apply to your new policy
    • The loyalty discounts or bonuses that you may lose from your current insurer
    • The reputation and service quality of the new insurer

Conclusion

Vehicle insurance is a vital product that can protect you, your vehicle, and other people on the road from financial losses due to accidents, theft, vandalism, fire, natural disasters, or other unforeseen events. However, vehicle insurance can also be a complex and confusing product that requires careful consideration and comparison before choosing the right one for your needs.

In this guide, we have covered the basics of vehicle insurance, the different types of vehicle insurance, how to choose the right vehicle insurance for your needs, how to save money on vehicle insurance premiums, how to make a vehicle insurance claim, and how to avoid common vehicle insurance pitfalls. We hope that this guide has helped you understand vehicle insurance better and make an informed decision about it.

FAQs

Here are some frequently asked questions about vehicle insurance:

  • Q: What is the difference between comprehensive and collision coverage?
  • A: Comprehensive coverage covers damage to your vehicle caused by events other than traffic collisions, such as fire, theft, vandalism, weather, natural disasters, or collision with animals. Collision coverage covers damage to your vehicle caused by traffic collisions with other vehicles or objects.
  • Q: What is the difference between market value and agreed value?
  • A: Market value is the amount that your vehicle is worth at the time of a claim based on its age, condition, mileage, etc. Agreed value is the amount that you and your insurer agree on as the value of your vehicle at the start of your policy.
  • Q: What is a no-claim bonus or discount?
  • A: A no-claim bonus or discount is a reward that some insurers offer to their customers who do not make any claims for a certain period of time (usually one year). It can reduce your premium or increase your coverage.
  • Q: What is a deductible or excess?
  • A: A deductible or excess is the amount that you have to pay before your insurer pays for your claim. It can be a fixed amount or a percentage of the claim amount.
  • Q: What are some factors that affect my vehicle insurance premium?
  • A: Some factors that affect your vehicle insurance premium are:
    • Your vehicle type, make, model, age, value, engine size, power, fuel type, security features, etc.
    • Your location, usage, mileage, parking location, etc.
    • Your age, gender, driving history, claims record, credit score, etc.
    • Your coverage level, excess amount, add-ons and extras, etc.
    • Your insurer’s rates, discounts, offers, etc.

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