If you own a car and are driving on the public road without car insurance, you are at a risk of being fined and even losing your license to drive. Under the Motor Traffic Act prevalent in various countries, car drivers must at least have coverage against third party injury or damage. So in short, if you are driving a car you have to be insured.
There are various types of insurance products available in the market. This comprises of the car insurance that an individual must have in order to drive legally on road, and the second is that which saves your life and/or your other valuables like home and personal belongings. These good to have policies are not a necessity but would surely help you to lead a stress free life.
The above policies can be briefly termed under two wide categories - life and general insurance. When you buy any of the above policy, you need to pay a premium to the company. In the former case, this premium amount is fixed at the time of buying the policy and is dependent on many factors such as your age, sex, profession, health condition, etc. This does not change annually unlike other policies under general insurance. Car insurance covers natural calamities such as lightening, floods, third party damage and personal accidents. It does not cover any normal wear and tear and depreciation.
When you buy these claims or any other general policy like home and travel insurance, the premium is kept as fixed by the company. The premium on car insurance is calculated on the basis of the make and model of the vehicle, city of registration, period of coverage and claims history. For example: A high value car like Mercedes will have a higher premium and if this car is used for commercial purpose like a taxi etc, then the premiums on car insurance will increase further because of its higher exposure to hazards. Similarly, a young owner with a high end car, or an owner with a long history of accidents will pay a higher premium than an experienced owner with a smaller engine car who has not had any accident before.
This basically happens because the company needs to create large enough funds to cover the payments made due to the insured's loss. In other words, the company pays compensation for the loss incurred by few insurers from the pool of premium that they have collected from all its insurers.
No company gives a 100 percent cover. They want their clients to be aware of their responsibility by imposing a standard 'excess'. Most of these general policies, especially car insurance and travel related insurance comprise of an 'excess 'element. This excess is the amount paid by the policy holder towards any loss while he/she is making a claim on the policy. This is called a compulsory excess. In addition to this, if the customer is willing to bear the portion of a claim voluntarily and agrees to pay over and above the compulsory excess, then the company levies a voluntary excess as well. This helps to reduce the annual premium payment.
As explained earlier, these premiums under general category are fixed annually and vary depending on the frequency of claim made in a year. However these companies also award a "no claims discount" to a car insurance policy holder who has successfully completed a twelve month period on roads and has not made a single claim. This enables the policy holder to get a discount on their next premium at each annual renewal. And this discount escalates as the length of their non-claim period grows. Should a policy holder need to make a claim during a 12 month period, the 'penalty' will be a reduced discount at the next renewal.
There is more than one company in the market from where you can buy your auto insurance. Some of the renowned ones being Max New York, AEGON Religare, Iffco Tokyo, Aviva General Insurance and many more.
Article Source: http://EzineArticles.com/?expert=Brian_Kuvic
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