The growing population has led to an increasing demand for different kinds of vehicles for transporting people and property. The high number of cars on the road has also led to a growing number of accidents due to motor vehicles’ usage. These accidents have led to many people’s death and disability, along with the destruction of property worth billions of dollars throughout the world. In real monetary terms, it has led to substantial financial losses to the individuals and the corporates, society, and the country overall. Car insurance has played a significant role in compensating the insured and accident victims to overcome financial losses.
Motor Insurance is also known by different names such as auto insurance, vehicle insurance, automobile insurance, motor vehicle insurance, and car insurance. The words, motor, and vehicle have been used interchangeably.
Motor insurance intends to provide coverage for financial expenses incurred due to covered perils. There are different types of motor insurance policies; each policy has its own limitations and exclusions. It is one of the most exciting and fastest-growing sectors in most countries. It also comes under the top three business classes in terms of GWP (gross working premiums) from a general Insurer’s perspective; it also consumes a significant chunk of compensation as far as the buyer of the insurance (whether corporate or an individual) is considered.
Mandatory auto insurance
Each country of the world may have its own unique features, and depending upon those features, the requirements of motor insurances are addressed. The first policies tried to cover third party losses. Later, it was expanded to cover loss occurring to the vehicle itself due to covered perils, and it helped provide different types of comprehensive coverages.
Almost all states in the US have mandatory car insurance. The compulsory insurance covers the liabilities to third parties arising out of vehicular accidents. Mandatory insurance will allow the locally registered companies to offer the products as mandated by the Governments. In case of compulsory insurance, the insurance companies will be required to provide the basic minimum coverage directed by the government.
One of the significant purposes of mandatory insurance for vehicles is to ensure that a vehicle accident victim gets financial compensation. The compensation will help the dependents of the victim to carry on with their lives. The governments work based on the statistics related to accidents and the compensation requirements of the country. This will result in working out the minimum cover provided by an insurer for the third-party insurance coverage. Once the minimum coverage is prescribed, the insurer is left with no option but to give their customers the minimum required coverage. The insurer may not be allowed to choose the customers and invariably asked not to deny the potential customers’ coverage.
Auto insurance companies
The insurance companies can compete in terms of pricing and quality of services. They also have an opportunity to offer better products than the mandated products to the customers. The varieties of the products provided are usually the improved versions of the ordered products. The private sector insurance companies commonly offer auto insurance, but the government also provides it.
Hence the availability of motor insurance is from both the private sector and the public sector insurance companies. Nowadays, due to more focus on privatization, the public sector insurance companies are being made into private sector companies, or at least a substantial portion of shares are sold to the private sector or to the general public to make it more responsive to the demands and requirements of the consumers.
Affordable Insurance Plans
In the US, as in most countries, a majority of the people belong to the middle class or below middle class; hence the disposable income of these people is very low. Owning a vehicle is no more a luxury but has become a necessity. Many finance companies, banks, and vehicle insurance companies offer installment schemes to promote the sale of vehicles and insurance policies to the customer who cannot afford cash down payment. This includes a no down payment auto insurance or any other convenient plan. Due to less disposable incomes, any significant expense due to a vehicular accident will drain the individual household’s minimal savings.
A vehicle is treated like a dangerous animal, and owning a car and operating it can bring about a loss to the third parties and the insured himself. In motor insurance terminology, the insured is termed as the first party, and the Insurance company is termed as the second party, and the rest is treated as the third party. The loss occurring to the insured vehicle due to an accident can be estimated easily, but you cannot easily calculate loss arising to the third parties.