A motor insurance policy covers damage related to the policyholder’s automobile. It covers losses suffered due to fire, theft or accident as well as liabilities resulting from losses to other people.
Motor Insurance: Mandatory Liability Insurance
Most nations have specific laws determining minimum liability insurance for every driver. Such a motor car insurance cover ensures that other people do not suffer due to an accident caused by an automobile driver. One should confirm the minimum insurance limit from the local traffic department. You may have to bear heavy penalties in case you are caught without a minimum motor car insurance cover.
Motor Insurance: What are Deductibles?
There is a deductible amount associated with every motor insurance policy. It represents the out-of-pocket expenses that the policyholder has to bear for a covered event. In other words, it is the share of the claimed amount that the policyholder has to provide. An insurance policy pays for the cover over and above the deductible amount. For instance, if you have a policy with a $700 deductible amount and you file an accident claim of $2,500, the insurance company will pay $1,800, which is the claimed amount excluding the deductible.
The deductible amount greatly influences the policy premium. With high deductibles, an insurance company faces a lower claims risk. Hence, the premium is set lower. However, an individual should consider his/her affordability limit while deciding on deductibles.
Motor Insurance: Liability Limits
Liability limits refer to the maximum amount that your motor insurance policy pays for an insured event. Every motor insurance policy has a defined limit of liability. For instance, if in an insured event the expense is $12,000 and your policy has a $10,000 maximum limit, the insurance company will pay $10,000 only (and that too after subtracting the deductibles).
Motor Insurance: Compare Before Buying
Owing to stiff competition in the insurance market, insurance companies are offering discounts and enhanced benefits to insurance seekers. So, it is essential to get quotes from different insurance companies and compare them thoroughly. Don’t just opt for lower prices. Consider the after-sales service, credit history and claims settlement record of the motor insurance company.