Why do I need auto
insurance?
Your car has two unique qualities. First, it is probably one of the most
expensive things you own. Insurance protects your investment and
guarantees you a way of coping with the expense of accidents, vandalism
or theft, as well as securing your financial responsibility to the bank or
other institution lending the money
to buy your vehicle.
Second, when you drive, you are operating a powerful machine, weighing
one ton or more and capable of moving at over 100 miles per hour. You
are responsible for the safety of your passengers, your fellow drivers,
other people's property, pedestrians and yourself. Insurance helps you live
up to that responsibility by ensuring your ability to cover the costs of
potential damages or injuries.
You are also required to be financially responsible by law, which are
best satisfied through your insurance coverage. In fact, in most provinces
insurance is a prerequisite to registering your car. So if you want to drive
your own vehicle, you must be insured.
Auto insurance is divided into several different types of coverage:
General liability covers damage you may cause to other people's
property and injuries to the people themselves.
Collision covers damage to your own vehicle in an accident.
Comprehensive (i.e., fire, theft and other non-collision damage)
covers fire damage to your vehicle, break-ins, vandalism or theft, as
well as natural disasters (earthquake, hail, hurricane, flood,
etc.--unless the vehicle is overturned, then it is considered a
collision).
Medical payments insurance, usually in the range of $5,000 to
$10,000, covers medical expenses for injuries. This "good-faith"
coverage guarantees immediate medical payments for you, your
passengers and other parties, regardless of who is at fault.
It also
covers you and members of your household in any accident
involving an automobile, whether you are on foot, on a bicycle, in a
friend's car, etc.
Uninsured motorist (UM) and underinsured motorist (UIM)
coverage protects you if you are injured in an accident with others
who themselves carry insufficient or no liability insurance.
Extra coverages include expenses for towing, labor, temporary
replacement vehicles, etc. These are generally defined as add-ons
or endorsements to your policy.
The cost of your insurance policy is based on the average cost of covering
actual losses, spread out over your particular "rating group" as a whole. Of
course, you may never have an accident or have your car stolen, and
therefore will never need to be compensated. But others in your category
may not be so lucky. Your premium will help to pay for their losses, just as
their premiums would help to pay for yours. In other words, you are
investing a little today in case you need a lot tomorrow; your investment is
pooled with others, and the pool pays for your loss.
VB Insurance
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