AUTOMOBILE INSURANCE
In just over twenty-five years, automotive insurance has evolved from a negligible ancillary service to a primary coverage for fire and casualty insurers. Automobile insurance was established to address a specific necessity: the motorist’s requirement for financial protection against losses incurred from automobile ownership and use. Once in motion, the automobile is a potentially hazardous device capable of causing personal harm, death, and property damage. Moreover, the automobile, akin to other assets, is susceptible to damage or destruction by fire and environmental factors. Due to its mobility, it is vulnerable to theft, damage, or destruction from collision with another object, whether in motion or immobile.
AUTOMOBILE HAZARDS
Looking at the current state of automobile hazards makes it clear that car insurance is more important now than ever. In 1926, about 23,500 fatalities and 700,000 injuries were caused by car accidents. More than 2,000,000 vehicle accidents caused property damage in that same year. From a social and humanitarian perspective, the enormous toll that car accidents take is deeply troubling, and it poses a serious threat to America’s capacity to practice conservation and avoid accidents.
Economically speaking, it’s a significant problem because the law makes everyone pay for their actions. In this case, if it’s proven that the motorist’s negligence caused the victim’s injury or death and the victim wasn’t partly to blame, then the motorist can be held liable for damages proportional to the harm they caused.
According to a conservative estimate, American motorists incur an annual loss of $350,000,000 due to damage suits. An estimated 75,000,000 dollars is lost annually due to fires, and 60,000 cars are destroyed in these disasters. Theft results in a total loss of about $90,000,000 in stolen vehicles and equipment, which amounts to about 100,000 vehicles. The damage produced by car accidents with other objects, whether moving or stationary, cannot be assessed due to a lack of statistical data. However, the total cost is likely to be substantial.
PRINCIPAL FORMS OF INSURANCE
The risks above can be mitigated by purchasing one of five main types of auto insurance: public liability, property damage, fire, theft, and collision. A public liability insurance policy promises to compensate the driver (the assured) for any financial loss that may occur due to another party’s claim against the insured for damages (physical or mental) caused by an accident that occurred while the insured was operating the insured vehicle. Likewise, a property damage contract covers the motorist for any financial loss that may arise due to his legal responsibility to others for the damage or destruction of property that is not his own or under his care as a result of an accident involving his vehicle.
THE POLICY CONTRACT
A policy contract is a crucial piece of paperwork. The document lays out the insuring agreement, the terms, limitations, and exclusions that come with it, the declarations used to categorize and rate the risk, and the basis for the entire contract. Insofar as third-party liability coverage is concerned, both the public liability and property damage contracts are identical. This means that the insurance company agrees to pay up any losses sustained by the policyholder in the event of an accident that does not involve the policyholder’s person or property but rather the person or property of another. However, in the case of fire, theft, and collision policies, the insurance provider agrees to pay the policyholder back if his vehicle is damaged or stolen.
PUBLIC LIABILITY
The Insuring Agreement: The insuring agreement within the public liability contract stipulates that the company will indemnify the policyholder (the assured) against losses resulting from legal liabilities for damages due to bodily injury, including death, sustained by any individual as a consequence of the ownership, maintenance, or use of the automobile specified in the policy. Furthermore, the company commits to defending all damage lawsuits, regardless of their merit, investigating all accidents, negotiating claim settlements, and covering all court costs and expenses arising from any legal proceedings it defends, along with all interest accruing post-judgment and all fees incurred by the assured for immediate surgical intervention necessary at the time of the accident.
PROPERTY DAMAGE
The Insuring Agreement: The insuring agreement within the public liability contract stipulates that the company will indemnify the policyholder (the assured) against losses resulting from legal liabilities for damages due to bodily injury, including death, sustained by any individual as a consequence of the ownership, maintenance, or use of the automobile specified in the policy. Furthermore, the company commits to defending all damage lawsuits, regardless of their merit, investigating all accidents, negotiating claim settlements, and covering all court costs and expenses arising from any legal proceedings it defends, along with all interest accruing post-judgment and all fees incurred by the assured for immediate surgical intervention necessary at the time of the accident.
COLLISION
The impact Insurance policy compensates the automobile owner for the actual loss or damage to their vehicle resulting exclusively from accidental impact with a stationary or moving object or from overturning. Collision Insurance is available in both full coverage and deductible formats. Under the comprehensive coverage policy, the insurer commits to compensating the vehicle owner for any loss, regardless of its magnitude. The cost for this type of insurance is elevated, as the insurance company must pay for the numerous scratches and dents that an automobile incurs during regular traffic use. In a deductible policy, each claim is individually assessed, and a predetermined set amount is subtracted from each claim, with the insurance company responsible solely for losses that exceed this amount. Under a $50 deductible policy, the policyholder is responsible for all minor losses of $50 or less and additionally covers the initial $50 of any losses that surpass this amount. The insurance company compensates the remaining damage after a deduction of $50. The prevalent deductibles are $50, $100, and $250. The expense of deductible collision insurance, particularly with higher deductibles, is minimal as the insurer is responsible solely for substantial losses that typically impose a hardship on the insured.
FIRE
The Automobile Fire Insurance policy compensates the automobile owner for loss or damage to their vehicle resulting from fire, lightning, and transportation hazards. The insurance agreement stipulates that the company will pay for losses due to fire from any cause and reimburse the insured if the automobile is damaged or destroyed due to sinking, collision, or derailment of any conveyance transporting the automobile over land or water—Liability Limitation. The predominant contract type in contemporary use is the non-valued version, wherein the company’s responsibility is confined to the actual cash worth of the insured automobile at the time of loss or damage.
THEFT INSURANCE
The Theft contract’s insuring agreement compensates the automobile owner for loss or damage to their vehicle resulting from theft, robbery, or pilferage. The typical theft policy excludes theft committed by anyone residing in the assured household or those in their employ. The contract excludes coverage for the theft, robbery, or pilferage of tools or repair equipment, save in instances of the theft of the entire automobile. There are additional exclusions concerning voluntary relinquishment of title, improper conversion by a mortgagor, and others, which the policyholder should comprehend well.
BASIS OF PREMIUM CHARGES
The premiums for all five types of automotive insurance differ by location. Public liability and property damage insurance rates are highest in New York City and lowest in the rural areas of the South and West. As anticipated, these territorial rate groups or zones are more prevalent for public liability and property damage due to significant variations in traffic hazards across the United States. In contrast, the number of zones for fire and theft insurance is minimal. Automobile premiums also differ across four primary categories of risk. A specific set of rates exists for private passenger vehicles, another for commercial cars and trucks, a third for public passenger transport vehicles, and a fourth for garages and dealers, the last representing a category of risk rather than a specific vehicle type.
