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Understanding Auto Insurance Policy Coverages

Updated on March 12, 2011

Today, auto insurance is not only a mandatory legal obligation but a great way to secure your life and your most treasured possession. An auto insurance coverage keeps you safe, and not only that, it protects the huge amount of money you have invested on your automobile. However, auto insurance can be very expensive if one is not careful because the auto insurance companies are in the industry to make money. It is therefore at your discretion to decide which insurance policy is best suited for you and your car. Here is an in-depth explanation of the different types of policies, and what they cover.

Third Party Insurance – this happens to be the most affordable insurance policy in the market today and covers an accident where you are at fault and as a result a third party has been affected directly or indirectly. Whatever happens to your car in the event of an accident is your own liability, you only contact your insurer to repair or pay for medical expenses of a third party. Most people who have less-valuable and old cars will have this type of insurance since not only is the policy affordable, the cost of repairing the car will be significantly lower.

Specialized Car Insurance – this type of insurance is mostly for classic cars, those which are 25 years old and above. Because these cars will be insured under ‘classic’, they will have their special services and needs, which the coverage will cater for. This type of coverage could rank in the same category as the comprehensive one save for the fact that it will limit you on the number of miles you are supposed to cover in every given year, meaning when you surpass the mileage you get out of cover.

Fully Comprehensive Auto Insurance Policy – this is a very comprehensive auto insurance policy coverage that will cover everything from theft, collision accident, damage to car because of natural disasters such as flooding and fire, medical expenses and costs for you and a third party involved in the accident, costs for damage caused to property, funeral expenses in the event of fatalities after an accident, and all else in between. As is expected, because this policy covers basically everything there is to be covered, the policy comes at a higher price than the rest. 

Third Party, Fire and Theft – this type of policy is similar to the fully comprehensive insurance policy but not really identical in every sense of the word. This is because just like in the comprehensive coverage, it will pay for accident, theft, and fire among others, but only when you are at fault. Remember that under the comprehensive coverage, if a third party hits your car and refuses to own up and disclose their insurance details, your insurer will cover any damages caused. However, under this policy, it is only when you are at fault does the coverage become effective.  

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