Reluctant questions that beginners always shy away from asking
Wikipedia tells me insurance is “an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.” As a beginner, being new to the concept of insurance, one cannot help but open the Wikipedia page first, can one? For all you beginners out there, tag along as we peruse through the basics of auto insurance.
• What is auto insurance?
Vehicle insurance purchased for vehicles provides financial protection against physical damage or bodily injury resulting from traffic collision (the meaning of which is another question that I have asked later) and against liability that is the immediate aftermath of an accident or theft. Now that’s the kind of protection/safety I wish my fancy shoes had!
• How much auto insurance do you need?
Third party coverage is mandatory in a few countries and protects you from the cost of damage to third parties (other people). How much liability coverage you need should be based on what you need to protect. Just as how liability coverage takes care of the third party, comprehensive coverage takes care of your car. And let’s be honest, what is more important than your own car?
• What exactly is Collision Coverage?
Collision covers the cost of repairing or replacing your car. If your car is worth more than what you could pay to replace it, it would be important to have collision coverage. If your car is more than a few years old and the loan is paid off, you could opt out of this coverage.
• What is your Deductible?
The deductible is the amount of an insurance claim you agree to pay out of your pocket before the insurance company pays the remainder of the claim. The deductible represents the amount of financial risk you are willing to assume. If you are willing to assume more financial risk in the form of a higher deductible, your premium cost is lower. In simple words, let’s assume your claim is P10,000; the insurance company would pay an amount of P9,000. The P1000 is the risk you will be taking personally.
• Am I a Millennial?
“I’m an amazing driver! Nothing will ever happen to my car.” The Millennial are generally an optimistic and sometimes overconfident group of ‘drivers’, in this case. However, the odds are something will happen to your car – and when it does, you are going to have to pay an unwilling amount.
The bottom line is, if you own a car, lease a car or even drive someone else’s car, auto insurance is a must-have. Not only are certain types of coverage mandatory, but the right type of auto insurance could protect you from a financial disaster if your car is stolen, damaged or, even worse, if you crash and that injures you or others.