Insurance of a vehicle is not an antidote to accidental damage and theft. It cannot cover all perils otherwise they’d pay out more in claims than they receive in premiums. For this reason, insurance companies limit cover to a few perils. While this differs from insurance company to insurance company, the following perils are generally covered by all:
Insurance for a vehicle for liability
Liability refers to the driver’s liability of damage. That is, if the driver of a vehicle causes an accident, then he or she is legally liable to pay for those damages (and injury for that matter). Liability insurance, or third party insurance, is added to insurance policies to cover this amount that the driver is legally liable for. In fact, this cover is compulsory in the United Kingdom and United States.
Insurance for a vehicle for accidental damage
Usually only comprehensive insurance for a vehicle includes accidental damage. This refers to the damage suffered by your vehicle or your property as a result of an accident, whether or not this accident was your fault. This peril is common and costly, which is why covering it pushes up insurance premiums.
Insurance for a vehicle for fire
Damage as a result of fire and explosion is usually standard on insurance for a vehicle. It might not seem like an imminent risk, but given that vehicles run on combustible fuels, it is important cover to have. Such a peril could see the total loss of your vehicle.
Insurance for a vehicle for credit
Newer insurance policies and insurance for a vehicle through a bank will usually include credit shortfall cover. Credit shortfall is the difference between how much the insurance company pays out and the amount you owe to the bank. There is often a big difference between these two amounts as the car depreciates a lot more than the credit or loan for it can be paid off, and insurance companies only pay out the value of the vehicle at the time of loss, and not the retail value of it new. This is a good insurance peril to have as it prevents you from paying off a vehicle that was either stolen or destroyed.
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