Insurance exists to safeguard an individual against loss. Car insurance refers to insurance against loss due to theft or traffic accidents. An insurance contract or policy specifies the terms and conditions under which an insurer will pay the insured. In most countries, it is compulsory to buy car insurance or automobile insurance to drive on public roads.
Insurance companies generally charge a flat per-car/per-year price. The insurers pay this amount, also known as a premium, to the insurance company. If the policyholder places a claim against the insurance, the company reimburses the claim from the funds raised by collecting such premiums. When buying car insurance, the customer is protected in different ways, depending on the type of coverage purchased.
Liability insurance covers claims against the customer or policyholder. Generally, it also covers claims against any other driver or operator of the policyholder's car, provided they do not live at the same address as the policyholder and are not particularly excluded on the policy. If the address of such drivers or operators is same as that of the policyholder, then they must be specifically covered on the policy. Liability insurance does not protect the customer or policyholder if he drives a car other than his own. In such a case, the customer is covered under the policy of the other car's owner.
Comprehensive insurance is designed to pay for repairs or replacement of the policyholder's car in the event of damage not resulting from an accident, including damage from inclement weather.
Collision coverage is an insurance that promises to pay for the repair or replacement of the policyholder's car in the event of an accident, regardless of who caused the accident.
Gap insurance was created taking into consideration the forever increasing cost of cars, extended term car loans and increase in the number of leased cars. Gap waivers provide protection for customers when a 'gap' is formed between the actual value of the vehicle and the amount of money owed to the bank.
