Auto insurance (or car insurance, motor insurance) is insurance consumers can purchase for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of car accidents. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. ... A small variety of cars, the most popular kind of automobile. ... The driver of this DAF tractor with an auto-transport semi-trailer prepares to offload Skoda Octavia cars in Cardiff, Wales For further uses of the word truck, see Truck (disambiguation). ... A car accident in Yate, near Bristol, England, in July 2004. ...

An insurance company may declare a vehicle totally destroyed ('totaled' or 'a write-off') if it appears replacement would be cheaper than repair. (Photo used with kind permission of car-accidents.com.)

Image File history File links Totaled_jeep_whoa. ...

Coverage levels

Insurance can cover some or all of the following items:

1. The insured party
2. The insured vehicle
3. Third parties

Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

Public policy

In many countries it is compulsory to purchase auto insurance before driving on public roads. Usually the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle. Typically, coverage against loss of or damage to the driver's own vehicle is optional - one notable exception to this is in Saskatchewan, where SGI provides collision coverage (less a $700 deductible) as part of its basic insurance policy. In South Australia Third Party Personal insurance from the State Government Insurance Corporation (SGIC) is included in the license registration fee. South Africa allocates a percentage of the money fom petrol into the Road Accidents Fund , which goes towards compensating third parties in accidents[1]. Most countries relate insurance to both the car and the driver, however the degree of each varies greatly. Motto: Multis E Gentibus Vires (Latin: From many peoples, strength) Official languages English Capital Regina Largest city Saskatoon Lieutenant-Governor Lynda M. Haverstock Premier Lorne Calvert (NDP) Parliamentary representation  - House seat  - Senate seats 14 6 Area  - Total  - % water Ranked 7th 651,036 km² 9. ... Saskatchewan Government Insurance or SGI is a crown corporation owned and operated by the Government of Saskatchewan. ... In an insurance policy, the deductible or excess is the portion of any claim that is not covered by the insurance provider. ... Motto: United for the Common Wealth Nickname: Festival State Other Australian states and territories Capital Adelaide Government Governor Premier Const. ...

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Mile Based Charging

Car insurance plans routinely charge a flat per-car/per-year price regardless of how much the car is used. Since a time unit provides no actual measurement of the actual miles of driving exposure each car consumes during the insured year, insurers have no credible statistical basis for the cost comparisons used to support price classifications. Other methods of differentiating include:

Reasonable estimation

As a sales enhancement, many car insurers offer a “low estimated future mileage” discount to customers who predict that the car’s mileage will be below some stated limit during the next premium period. There is no verification involved and no additional charge if the car is subsequently driven more than the stated amount. This arbitrary discount tends to foster customer belief in the mistaken idea that “miles” are just one of many classification factors used to raise or lower prices from the territorial base rate. In fact, odometer miles (which insurers do not use) are not a factor but a metric - the only valid basis for measuring each car’s consumption of insurance protection in on-the-road use.

Odometer-based systems

Cents Per Mile Now(1986) advocates classified odometer-mile rates. After the company's risk factors have been applied and the customer has accepted the per-mile rate offered, customers buy prepaid miles of insurance protection as needed, like buying gallons of gasoline. Insurance automatically ends when the odometer limit (recorded on the car’s insurance ID card) is reached unless more miles are bought. Customers keep track of miles on their own odometer to know when to buy more. The company does no after-the-fact billing of the customer, and the customer doesn't have to estimate a "future annual mileage" figure for the company to obtain a discount. In the event of a traffic stop, an officer could easily verify that the insurance is current by comparing the figure on the insurance card to that on the odometer.

Critics point out the possibility of cheating the system by odometer tampering. Although the newer electronic odometers are difficult to roll back, they can still be defeated by disconnecting the odometer wires and reconnecting them later. However, as the Cents Per Mile Now website points out: "As a practical matter, resetting odometers requires equipment plus expertise that makes stealing insurance risky and uneconomical. For example, in order to steal 20,000 miles of continuous protection while paying for only the 2,000 miles from 35,000 miles to 37,000 miles on the odometer, the resetting would have to be done at least nine times to keep the odometer reading within the narrow 2,000-mile covered range. There are also powerful legal deterrents to this way of stealing insurance protection. Odometers have always served as the measuring device for resale value, rental and leasing charges, warranty limits, mechanical breakdown insurance, and cents-per-mile tax deductions or reimbursements for business or government travel. Odometer tampering—detected during claim processing—voids the insurance and, under decades-old state and federal law, is punishable by heavy fines and jail."

Under the cents-per-mile system, rewards for driving less are delivered automatically without need for administratively cumbersome and costly technology. Uniform per-mile exposure measurement for the first time provides the basis for statistically valid rate classes. Insurer premium income automatically keeps pace with increases or decreases in driving activity, cutting back on resulting insurer demand for rate increases and preventing today's windfalls to insurers when decreased driving activity lowers costs but not premiums.

GPS-based system

In 1998, Progressive Insurance started a pilot program in Texas in which volunteers installed a GPS-based technology called Autograph in exchange for a discount. The device tracked their driving behavior and reported the results via cellular phone to the company[2]. Policyholders were reportedly more upset about having to pay for the expensive device than they were over privacy concerns [3]. 1998 (MCMXCVIII) is a common year starting on Thursday of the Gregorian calendar, and was designated the International Year of the Ocean. ... The Progressive Corporation NYSE: PGR is a U.S. auto insurance company headquartered in Mayfield Village, a suburb of Cleveland, Ohio. ... Official language(s) None. ... Over fifty GPS satellites such as this NAVSTAR have been launched since 1978. ...

In 1996, Progressive filed for and obtained a US patent (US patent 5,797134) on their process. Progressive has also filed corresponding patent applications in Europe and Japan. UK auto insurer, Norwich Union, has obtained an exclusive license to Progressive's European patent application. They have recently completed a successful pilot test of the technology and it is now available commercially under the tradename "Pay As You Drive"(tm). Norwich Union is an insurance company, part of the Aviva group, itself created by a merger of Norwich Union and CGU (Commercial and General Union) in 2000. ...

OBDII-based system

In 2004, the company launched another pilot program to allow policyholders to earn a discount on their premiums by consenting to use its TripSense device. TripSense connects to a car's OnBoard Diagnostic(OBD-II) port, which exists in all cars built after 1996. The discount is forfeited if the device is disconnected for a significant amount of time[4]. 2004 (MMIV) was a leap year starting on Thursday of the Gregorian calendar. ... OBD-II (OnBoard Diagnostics version 2) is a common hardware diagnostics interface that is present on all cars sold in the United States after 1996. ... 1996 (MCMXCVI) is a leap year starting on Monday of the Gregorian calendar, and was designated the International Year for the Eradication of Poverty. ...

Auto Insurance in the United States

Coverage Available

By buying auto insurance, depending on the type of coverage purchased, the consumer may be protected with these coverage types:

Due to the sharp decline in value immediately following purchase, there is generally a period in which the remaining car payments exceed the compensation the insurer will pay for a "totaled" (destroyed, or written-off) vehicle. So-called GAP insurance was established in the early 1980's to provide protection to consumers based upon buying and market trends. The escalating price of cars, extended term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a "gap" exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In some countries including New Zealand and Australia market structures mean that people are more likely to buy a nearly new car than a new car so this is less of a problem.

In the United States, liability insurance covers claims against the policy holder and generally, any other operator of the insured’s vehicle, provided they do not live at the same address as the policy holder and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary for example, when a family member comes of driving age they must be added on to the policy. Liability insurance generally does not protect the policy holder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party’s policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident.

Generally, liability coverage does extend when you rent a car. However, in most cases only liability applies. Any additional coverage, such as comprehensive policies, i.e. “full coverage” may not apply. Full coverage premiums are based on, among other factors, the value of the insured’s vehicle. This coverage may not apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured’s vehicle, assuming that a rental car may be worth more than the insured’s vehicle. Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.[5] Visa is a brand of credit card and debit card operated by the Visa International Service Association of San Francisco, California, USA, an economic joint venture of 21,000 financial institutions that issue and market Visa products. ... MasterCard Incorporated is a membership organization owned by the 25,000 financial institutions that issue its card. ...

In some regions, the costs associated with not having access to the vehicle ("Loss of Use") is also covered. This is usually an optional coverage.

United Kingdom Laws regarding motor insurance

In 1930 the UK the government introduced a law that required every person who used a vehicle on the road to have at least third party personal injury insurance. Today UK law is defined by the The Road Traffic Act which was last modified in 1991.

The Act requires all motorists to be insured against their liability for injuries to others (including passengers) and for damage to other persons property resulting from use of a vehicle on a public road or in other public places. This is called Third Party Insurance. It is an offence to drive your car, or allow others to drive it, without at least Third Party insurance.

The insurance certificate or cover note issued by the insurance company constitutes legal evidence that the vehicle specified on the document is indeed insured. The Law says that an authorised person, such as the police, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, then the driver has ten days to take a valid insurance certificate to a specified Police Station. Failure to produce an insurance certificate is an offence.

Sources

• Texas Gives Green Light to Cents-Per-Mile Auto Insurance, NOW Insurance Project, National Organization for Women.
• Pay as You Drive Now, Oregon Environmental Council, 2003.
• Cents Per Mile Now, 2004.
• Progressive's "pay-as-you-drive" auto insurance poised for wide rollout, Joe Frey, Insure.com, July 18, 2000.
• Insurance program rewards drivers who drive less and slower, Chris Miller, Aftermarket Business, Sep. 24, 2004.
• New technology provides detailed info on driving habits, by Tom Scheck, Minnesota Public Radio, August 23, 2004.
• The smartest way to buy auto insurance, by Jeanine Steele
• Auto Insurance Rates On The Decline in 2005, by Stephen Herron

See also

• Alcohol exclusion laws
• Extended coverage

Alcohol exclusion laws were passed in the 1940s in the United States to discourage people from drinking alcoholic beverages and to save insurance companies money from alcohol-related claims (Ensuring Solutions to Alcohol Problems, George Washington University Medical Center, 2005). ... Extended coverage is a term used in the insurance business. ...

External links

Brokers Online [6] - UK web site - Frequently Asked Questions about Car Insurance