History
Widespread use of the motor car began after thePublic policies
In many jurisdictions, it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the driver; however, the degree of each varies greatly. Several jurisdictions have experimented with a "pay-as-you-drive" insurance plan which utilizes either a tracking device in the vehicle or vehicle diagnostics. This would address issues of uninsured motorists by providing additional options and also charge based on the miles (kilometers) driven, which could theoretically increase the efficiency of the insurance, through streamlined collection.Australia
In Australia, every state has its own ''Compulsory Third-Party'' (CTP) insurance scheme. CTP covers only personal injury liability in a vehicle crash. ''Comprehensive'' and ''Third-Party Property Damage, with or without Fire and Theft'' insurance, are sold separately. * ''Comprehensive'' insurance covers damages to third-party property and the insured vehicle and property. * ''Third-Party Property Damage'' insurance covers damage to third-party property and vehicles, but not the insured vehicle. * ''Third-Party Property Damage with Fire and Theft'' insurance covers the insured vehicle against fire and theft as well as third-party property and vehicles.Compulsory Third-Party Insurance
CTP insurance is compulsory in every state in Australia and is paid as part of vehicle registration. It covers the vehicle owner and any person who drives the vehicle against claims for liability for death or injury to people caused by the fault of the vehicle owner or driver. CTP may include any kind of physical harm, bodily injuries and may cover the cost of all reasonable medical treatment for injuries received in the crash, loss of wages, cost of care services and, in some cases, compensation for pain and suffering. Each state in Australia has a different scheme. Third-Party Property insurance or Comprehensive insurance covers the third party with the repairing cost of the vehicle, any property damage or medication expenses as a result of a crash by the insured. They are not to be confused with Compulsory Third-Party insurance, which is for injuries or death of someone in a motor crash. InBangladesh
For all types of motor insurance policies inCanada
Several Canadian provinces (China
Traffic Compulsory Insurance provides protection in the event of third party injuries, third party property losses, etc. The minimum liability cover is RMB180,000 for death and injury/per crash, RMB18,000 for medical expense, and RMB2,000 for physical loss. Additional 3rd Party Liability Insurance also known as Commercial Motor Insurance provides extra cover up to RMB10,000,000 excluding the driver and passengers. Driver and Passenger insurance covers the driver and passengers, whilst Vehicle Damage and Theft Insurance covers vehicle damage and the objects contained inside. Excess Waiver Insurance is an additional option that waives any deductibles. Some differences apply in different regions:Hong Kong
According to section 4(1) of the Motor Vehicles Insurance (Third-Party Risks) Ordinance (Cap. 272 of the Laws of Hong Kong), all users of a car, include its permitted users, must have insurance or some other security with respect to third-party risks. Third party insurance protects the policyholder against liability of death or bodily injury to third party up to HK$100,000,000 and/or damage to third party property up to HK$2,000,000 as a result of crash arising out of the use of the insured vehicle. Comprehensive Motor Insurance is also available.Macau
The mandatory minimum legal requirement Third Party Liability (“TPL”) Cover is MOP1,500,000 per crash and MOP30,000,000 per year, protecting against the legal liability arising from a traffic crash causing loss and damages to any third party.. Comprehensive Motor Insurance is also available.European Union
In the European Union, the insurance is compulsory with minimum amounts: * in the case of personal injury, a minimum amount of cover of €1,000,000 per victim or €5,000,000 per claim, whatever the number of victims; * in the case of damage to property, €1,000,000 per claim, whatever the number of victims. In some European languages, comprehensive insurance is known as ''casco''.Germany
Since 1939, it has been compulsory to have third-party personal insurance before keeping a motor vehicle in all federal states of Germany. In addition, every vehicle owner is free to take out a comprehensive insurance policy. All types of car insurance are provided by several private insurers. The amount of insurance contribution is determined by several criteria, like the region, the type of car or the personal way of driving. The minimum coverage defined by German law for car liability insurance / third-party personal insurance is €7,500,000 for bodily injury (damage to people), €500,000 for property damage and €50,000 for financial/fortune loss which is in no direct or indirect coherence with bodily injury or property damage. Insurance companies usually offer all-in/combined single limit insurance policies of €50,000,000 or €100,000,000 (about €141,000,000) for bodily injury, property damage and other financial/fortune loss (usually with a bodily injury coverage limitation of €8–15,000,000 for each bodily injured person).Hungary
Third party vehicle insurance is mandatory for all vehicles in Hungary. No exemption is possible by money deposit. The premium covers all damage up to HUF 500m (about €1.8m) per crash without deductible. The coverage is extended to HUF 1,250m (about €4.5m) in case of personal injuries. Vehicle insurance policies from all EU countries and some non-EU countries are valid in Hungary based on bilateral or multilateral agreements. Visitors with vehicle insurance not covered by such agreements are required to buy a monthly, renewable policy at the border.Indonesia
Third-party vehicle insurance is a mandatory requirement in Indonesia and each individual car and motorcycle must be insured or the vehicle will not be considered legal; this compulsory auto insurance is legally called the Road Traffic Accidents Compulsory Coverage Fund ( id, Dana Pertanggungan Wajib Kecelakaan Lalu Lintas Jalan, DPWKLLJ). Therefore, a motorist cannot drive the vehicle until it is insured. DPWKLLJ was introduced in 1964 and merely covers body injuries, and is operated by a SOE called . DPWKLLJ is included, through an annual premium called the ''Compulsory Donation to the Road Traffic Accident Fund'' ( id, Sumbangan Wajib Dana Kecelakaan Lalu Lintas Jalan, ''SWDKLLJ''), in the annual vehicle tax which is paid to the local ''Samsat'' (''Sistem Administrasi Manunggal di bawah Satu Atap''), which is responsible for cars and roads.India
Auto insurance in India covers the loss of or damage caused to the automobile or its parts due to natural and man-made calamities. It provides ''accident cover for individual owners'' of the vehicle while driving and also for ''passengers and third party legal liability''. There are certain general insurance companies who also offer online insurance service for the vehicle. Auto insurance is a compulsory requirement for all new vehicles used whether for commercial or personal use. Insurance companies have tie-ups with leading automobile manufacturers. They offer their customers instant auto quotes. Premiums are determined by a number of factors and the amount of premium increases with the rise in the price of the vehicle. The claims of the auto insurance in India can be accidental, theft claims or third party claims. Certain documents are required for claiming auto insurance, like duly signed claim form, RC copy of the vehicle, driving license copy, FIR copy, original estimate and policy copy. There are different types of auto insurance in India: *Private car insurance – the fastest growing sector in India as it is compulsory for all new cars. The amount of premium depends on the make and value of the car, state where the car is registered and the year of manufacture. This amount can be reduced by asking the insurer for a no claim bonus (NCB) if no claim is made for insurance in previous year. *Two wheeler insurance – covers accidental insurance for the driver of the vehicle. The amount of premium depends on the current showroom price multiplied by the depreciation rate fixed by the Tariff Advisory Committee at the beginning of a policy period. *Commercial vehicle insurance – provides cover for all the vehicles which are not used for personal purposes like trucks and HMVs. The amount of premium depends on the showroom price of the vehicle at the commencement of the insurance period, make of the vehicle and the place of registration of the vehicle. Auto insurance generally includes: * Loss or damage by crash, fire, lightning, self ignition, external explosion, burglary, housebreaking or theft, malicious act * Liability for third-party injury/death, third-party property and liability to paid driver * On payment of appropriate additional premium, loss/damage to electrical/electronic accessories Auto insurance generally does not include: * Consequential loss, depreciation, mechanical and electrical breakdown, failure or breakage * When the vehicle is used outside the geographical area covered by the policy * War or nuclear perils and drunken drivingThird party insurance
Third party insurance cover is mandatory under the Motor Vehicles Act, 1988. This cover cannot be used for personal damages. This is offered at low premiums and allows for third party claims under "no-fault liability". The premium is calculated through the rates provided by the Tariff Advisory Committee. This is a branch of the IRDA (Insurance Regulatory and Development Authority of India). It covers bodily injury/accidental death and property damage.Ireland
The Road Traffic Act, 1933 requires all drivers of mechanically propelled vehicles in public places to have at least third-party insurance, or to have obtained exemption – generally by depositing a (large) sum of money to the High Court as a guarantee against claims. In 1933, this figure was set at £15,000. The Road Traffic Act, 1961 (which is currently in force) repealed the 1933 act but replaced these sections with functionally identical sections. From 1968, those making deposits require the consent of the Minister for Transport to do so, with the sum specified by the Minister. Those not exempted from obtaining insurance must obtain a certificate of insurance from their insurance provider, and display a portion of this (anItaly
The law 990/1969 requires that each motor vehicle or trailer standing or moving on a public road have third-party insurance (called RCA, ''Responsabilità civile per gli autoveicoli''). Historically, a part of the certificate of insurance must be displayed on the windscreen of the vehicle. This latter requirement was revoked in 2015, when a national database of insured vehicles was built by the Insurance Company Association (ANIA, ''Associazione Nazionale Imprese Assicuratrici'') and the National Transportation Authority (''Motorizzazione Civile'') to verify (by private citizens and public authorities) if a vehicle is insured. There is no exemption policy to this law disposition. Driving without the necessary insurance for that vehicle is an offence that can be prosecuted by the police and fines range from 841 to 3,287 euros. Police forces also have the power to seize a vehicle that does not have the necessary insurance in place, until the owner of the vehicle pays a fine and signs a new insurance policy. The same provision is applied when the vehicle is standing on a public road. Minimal insurance policies cover only third parties (including the insured person and third parties carried with the vehicle, but not the driver, if the two do not coincide). ''Third parties, fire and theft'' is a common insurance policy, while the all-inclusive policies (''kasko'' policy) which include also damages of the vehicle causing the crash or the injuries. It is also common to include a renounce clause of the insurance company to compensate the damages against the insured person in some cases (usually in case of DUI or other infringement of the law by the driver). The victims of crashes caused by non-insured vehicles could be compensated by the Road's Victim Warranty Fund (''Fondo garanzia vittime della strada''), which is covered by a fixed amount (2.5%, as 2015) of each RCA insurance premium.Netherlands
Third-party vehicle insurance is a mandatory requirement for every vehicle in the Netherlands. This obligation is mandatory based on article 2 of the . When a vehicle is not insured the owner will receive a fine from the RDW (). The third-party vehicle insurance is called a where WA stands for which means legal liability. In general there are three types of auto insurance in the Netherlands: (liability insurance), (limited frame coverage), and (full frame coverage). Limited frame and full frame coverage will provide more coverage against certain additional risks which are not covered by the mandatory legal third-party coverage. For example limited frame coverage will provide coverage against damage caused by the weather such as storm and flooding. Also fire damage and theft of the car is covered. Full frame coverage will provide coverage against all risks mentioned plus damage to the car caused by the driver himself.New Zealand
Within New Zealand, theNorway
In Norway, the vehicle owner must provide the minimum liability insurance for his/her vehicle(s) – of any kind. Otherwise, the vehicle is illegal to use. If a person drives a vehicle belonging to someone else and has a crash, the insurance will cover for damage done. Note that the policy carrier can choose to limit the coverage to only apply for family members or persons over a certain age.Romania
Romanian law mandates Răspundere Auto Civilă, a motor-vehicle liability insurance for all vehicle owners to cover damages to third parties.Russian Federation
Motor vehicle liability insurance is mandatory for all owners in Russian legislation. Insurance of the vehicle itself is technically voluntary, but may be mandated in some circumstances, e.g. if the car is leased.South Africa
South Africa allocates a percentage of the money from fuel into theSpain
Each motor vehicle on a public road is required to have third party insurance (called ). Police forces have the power to seize vehicles that do not have the necessary insurance in place, until the owner of the vehicle pays the fine and signs a new insurance policy. Driving without the necessary insurance for that vehicle is an offence that will be prosecuted by the police and will receive a penalty. The same provision is applied when the vehicle is standing on a public road. The minimum insurance policy covers only third parties (including the insured person and third parties carried with the vehicle, but not the driver, if the two do not coincide). ''Third parties, fire and theft'' is a common insurance policy. Victims of accidents caused by non-insured vehicles may be compensated by a Warranty Fund, which is covered by a fixed amount for each insurance premium. Since 2013 it is possible to contract an insurance by days as is possible in countries such as Germany and the U.K.United Arab Emirates
When buying car insurance in the United Arab Emirates, the traffic department requires a 13-month insurance certificate each time a person registers or renews a vehicle registration. In Dubai, vehicle insurance is compulsory as per the UAE RTA law. There are two types of motor insurance policies in Dubai, Third-Party Liability Insurance and Comprehensive Motor Insurance. It is mandatory to have third-party liability insurance for every individual vehicle owner in Dubai. This insurance policy is the most basic form of vehicle insurance Dubai as it covers the third-party property damage or bodily injuries caused by the insured vehicle. Policyholder's own vehicle damage such as fire, theft, and accidental collision is not covered under the third-party liability insurance policy.United Kingdom
In 1930, the UK 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, this law is defined by the Road Traffic Act 1988, (generally referred to as the RTA 1988 as amended) which was last modified in 1991. The Act requires that motorists either be insured, or have made a specified deposit ( £500,000 in 1991) and keeps the sum deposited with the Accountant General of the Supreme Court, against 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. It is an offence to use a motor vehicle, or allow others to use it without insurance that satisfies the requirements of the Act. This requirement applies while any part of a vehicle (even if a greater part of it is on private land) is on the public highway. No such legislation applies on private land. However, private land to which the public have a reasonable right of access (for example, a supermarket car park during opening hours) is considered to be included within the requirements of the Act. Police have the power to seize vehicles that do not appear to have necessary insurance in place. A driver caught driving without insurance for the vehicle he/she is in charge of for the purposes of driving, is liable to be prosecuted by the police and, upon conviction, will receive either a fixed penalty or magistrate's courts penalty. The registration number of the vehicle shown on the insurance policy, along with other relevant information including the effective dates of cover are transmitted electronically to the UK's Motor Insurance Database (MID) which exists to help reduce incidents of uninsured driving in the territory. The Police are able to spot-check vehicles that pass within range of automated number plate recognition (ANPR) cameras, that can search the MID instantly. Proof of insurance lies entirely with the issue of a Certificate of Motor Insurance, or cover note, by an Authorised Insurer which, to be valid, must have been previously 'delivered' to the insured person in accordance with the Act, and be printed in black ink on white paper. The insurance certificate or cover note issued by the insurance company constitutes the only legal evidence that the policy to which the certificate relates satisfies the requirements of the relevant law applicable in Great Britain, Northern Ireland, the Isle of Man, the Island of Guernsey, the Island of Jersey and the Island of Alderney. The Act states that an authorised person, such as a police officer, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, and evidence of insurance cannot be found by other means such as the MID, then the Police are empowered to seize the vehicle instantly. The immediate impounding of an apparently uninsured vehicle replaces the former method of dealing with insurance spot-checks where drivers were issued with an HORT/1 (so-called because the order was form number 1 issued by the Home Office Road Traffic dept). This 'ticket' was an order requiring that within seven days, from midnight of the date of issue, the driver concerned was to take a valid insurance certificate (and usually other driving documents as well) to a police station of the driver's choice. Failure to produce an insurance certificate was, and still is, an offence. The HORT/1 was commonly known – even by the issuing authorities when dealing with the public – as a "Producer". As these are seldom issued now and the MID relied upon to indicate the presence of insurance or not, it is incumbent upon the insurance industry to accurately and swiftly update the MID with current policy details and insurers that fail to do so can be penalised by their regulating body. Vehicles kept in the UK must now be continuously insured unless a Statutory Off Road Notification (SORN) has been formally submitted. This requirement arose following a change in the law in June 2011 when a regulation known as Continuous Insurance Enforcement (CIE) came into force. The effect of this was that in the UK a vehicle that is not declared SORN, must have a valid insurance policy in force whether or not it is kept on public roads and whether or not it is driven. Insurer, and Vehicle Excise Duty (VED) / licence data, are shared by the relevant authorities including the police and this forms an integral part of the mechanism of CIE. All UK registered vehicles, including those that are exempt from VED (for example, Historic Vehicles and cars with low or zero emissions) are subject to the VED taxation application process. Part of this is a check on the vehicle's insurance. A physical receipt for the payment of VED was issued by way of a paper disc which, prior to 1 October 2014, meant that all motorists in the UK were required to prominently display the tax disc on their vehicle when it was kept or driven on public roads. This helped to ensure that most people had adequate insurance on their vehicles because insurance cover was required to purchase a disc, although the insurance must merely have been valid at the time of purchase and not necessarily for the life of the tax disc. To address the problems that arise where a vehicle's insurance was subsequently cancelled but the tax disc remained in force and displayed on the vehicle and the vehicle then used without insurance, the CIE regulations are now able to be applied as the Driver & Vehicle Licence Authority (DVLA) and the MID databases are shared in real-time meaning that a taxed but uninsured vehicle is easily detectable by both authorities and Traffic Police. From 1 October 2014, it is no longer a legal requirement to display a vehicle excise licence (tax disc) on a vehicle. This has come about because the whole VED process can now be administered electronically and alongside the MID, doing away with the expense, to the UK Government, of issuing paper discs. If a vehicle is to be "laid up" for whatever reason, a Statutory Off Road Notification (SORN) must be submitted to the DVLA to declare that the vehicle is off the public roads and will not return to them unless the SORN is cancelled by the vehicle's owner. Once a vehicle has been declared 'SORN' then the legal requirement to insure it ceases, although many vehicle owners may desire to maintain cover for loss of or damage to the vehicle while it is off the road. A vehicle that is then to be put back on the road must be subject to a new application for VED and be insured. Part of the VED application requires an electronic check of the MID, in this way the lawful presence of a vehicle on the road for both VED and insurance purposes is reinforced. It follows that the only circumstances in which a vehicle can have no insurance is if it has a valid SORN; was exempted from SORN (as untaxed on or before 31 October 1998 and has had no tax or SORN activity since); is recorded as 'stolen and not recovered' by the Police; is between registered keepers; or is scrapped. '' Road Traffic Act Only Insurance'' differs from ''Third-Party-Only Insurance'' (detailed below) and is not often sold, unless to underpin, for example, a corporate body wishing to self-insure above the requirements of the Act. It provides the very minimum cover to satisfy the requirements of the Act. ''Road Traffic Act Only Insurance'' has a limit of £1,000,000 for damage to third-party property, while third-party-only insurance typically has a greater limit for third-party property damage. Motor insurers in the UK place a limit on the amount that they are liable for in the event of a claim by third parties against a legitimate policy. This can be explained in part by theInvestigation into repair costs & fraudulent claims
In September 2012, it was announced that the Competition Commission had launched an investigation into the UK system for credit repairs and credit hire of an alternative vehicle leading to claims from third parties following an crash. Where their client is considered to be not at fault, Accident Management Companies will take over the running of their client's claim and arrange everything for them, usually on a 'No Win - No Fee' basis. It was shown that the insurers of the at-fault vehicle, were unable to intervene in order to have control over the costs that were applied to the claim by means of repairs, storage, vehicle hire, referral fees and personal injury. The subsequent cost of some items submitted for consideration has been a cause for concern over recent years as this has caused an increase in the premium costs, contrary to the general duty of all involved to mitigate the cost of claims. Also, the recent craze of "Cash for crash" has substantially raised the cost of policies. This is where two parties arrange a collision between their vehicles and one driver making excessive claims for damage and non-existent injuries to themselves and the passengers that they had arranged to be "in the vehicle" at the time of the collision. Another recent development has seen crashes being caused deliberately by a driver "slamming" on their brakes so that the driver behind hits them, this is usually carried out at roundabouts, when the following driver is looking to the right for oncoming traffic and does not notice that the vehicle in front has suddenly stopped for no reason. The 'staging' of a motor collision on the Public Highway for the purpose of attempting an insurance fraud is considered by the Courts to be organised crime and upon conviction is dealt with as such.United States
The regulations for vehicle insurance differ with each of the 50 US states and other territories, with each U.S. state having its own mandatory minimum coverage requirements (''see separate main article''). Each of the 50 U.S. states and the District of Columbia requires drivers to have insurance coverage for both bodily injury and property damage, except New Hampshire and Virginia, but the minimum amount of coverage required by law varies by state. For example, minimum bodily injury liability coverage requirements range from $30,000 inMalaysia
In Malaysia, renewing car insurances is a very common thing. In general, there are four types of car insurance available for Malaysians: * Act cover This is the minimum cover corresponding to the terms of the Road Transport Act 1987. The insurance concerns the legal liability for death or physical injury to the third party (not include the passengers), so it is hardly ever written by insurers. * Third-party coverage This type is compulsory to buy for every vehicle so it is the most basic and common car insurance, which insures you against claims for the injury or damage to the third party or its property in a crash. * Third-party, fire, and theft coverage In addition to third-party coverage, this policy also provides insurance for your own vehicle due to fire, crash or theft. * Comprehensive coverage This policy provides the widest coverage, i.e. the third party's physical injury and death, third party's vehicle damage and your own vehicle's damage caused by fire, theft or a crash. This type of insurance is usually designed for luxury vehicles.Coverage levels
Vehicle insurance can cover some or all of the following items: * The insured party (medical payments) * Property damage caused by the insured * The insured vehicle (physical damage) * Third parties (car and people, property damage and bodily injury) * Third party, fire and theft * In some jurisdictions coverage for injuries to persons riding in the insured vehicle is available without regard to fault in the auto crash (No Fault Auto Insurance) * The cost to rent a vehicle if yours is damaged. * The cost to tow your vehicle to a repair facility. * Crashes involving uninsured motorists. Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or crash damage independently. If a vehicle is declared aExcess
An excess payment, also known as aCompulsory excess
A compulsory excess is the minimum excess payment the insurer will accept on the insurance policy. Minimum excesses vary according to the personal details, driving record and the insurance company. For example, young or inexperienced drivers and types of incident can incur additional compulsory excess charges.Voluntary excess
To reduce the insurance premium, the insured party may offer to pay a higher excess (deductible) than the compulsory excess demanded by the insurance company. The voluntary excess is the extra amount, over and above the compulsory excess, that is agreed to be paid in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by the insurer, the insurer is able to offer a significantly lower premium.Basis of premium charges
Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company, in accordance with a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages. When the premium is not mandated by the government, it is usually derived from the calculations of an actuary, based on statistical data. The premium can vary depending on many factors that are believed to affect the expected cost of future claims. Those factors can include the car characteristics, the coverage selected (Neighbourhood
The address of the owner can affect the premiums. Areas with high crime rates generally lead to higher costs of insurance.Mondalek, Alexandra (20 November 2015Gender
Because male drivers, especially younger ones, are on average often regarded as tending to drive more aggressively, the premiums charged for policies on vehicles whose primary driver is male are often higher. This discrimination may be dropped if the driver is past a certain age. On 1 March 2011, the European Court of Justice decided insurance companies who used gender as a risk factor when calculating insurance premiums were breaching EU equality laws.Cendrowicz, Leo (2 March 2011Age
Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognized courses, such as theU.S. driving history
In most U.S. states, moving violations, including running red lights and speeding, assess points on a driver's driving record. Since more points indicate an increased risk of future violations, insurance companies periodically review drivers' records, and may raise premiums accordingly. Rating practices, such as debit for a poor driving history, are not dictated by law. Many insurers allow one moving violation every three to five years before increasing premiums. Crashes affect insurance premiums similarly. Depending on the severity of the crash and the number of points assessed, rates can increase by as much as twenty to thirty percent. Any motoring convictions should be disclosed to insurers, as the driver is assessed by risk from prior experiences while driving on the road.Marital status
Statistics show that married drivers average fewer crashes than the rest of the population so policy owners who are married often receive lower premiums than single persons.Profession
The profession of the driver may be used as a factor to determine premiums. Certain professions may be deemed more likely to result in damages if they regularly involve more travel or the carrying of expensive equipment or stock or if they are predominant either among women or among men.Vehicle classification
Two of the most important factors that go into determining the underwriting risk on motorized vehicles are: performance capability and retail cost. The most commonly available providers of auto insurance have underwriting restrictions against vehicles that are either designed to be capable of higher speeds and performance levels, or vehicles that retail above a certain dollar amount. Vehicles that are commonly considered luxury automobiles usually carry more expensive physical damage premiums because they are more expensive to replace. Vehicles that can be classified as high performance autos will carry higher premiums generally because there is greater opportunity for risky driving behavior. Motorcycle insurance may carry lower property-damage premiums because the risk of damage to other vehicles is minimal, yet have higher liability or personal-injury premiums, because motorcycle riders face different physical risks while on the road. Risk classification on automobiles also takes into account the statistical analysis of reported theft, accidents, and mechanical malfunction on every given year, make, and model of auto.Distance
Some car insurance plans do not differentiate in regard to how much the car is used. There are however low-mileage discounts offered by some insurance providers. Other methods of differentiation would include over-road distance between the ordinary residence of a subject and their ordinary, daily destinations.Reasonable distance estimation
Another important factor in determining car insurance premiums involves the annual mileage put on the vehicle, and for what reason. Driving to and from work every day at a specified distance, especially in urban areas where common traffic routes are known, presents different risks than how a retiree who does not work any longer may use their vehicle. Common practice has been that this information was provided solely by the insured person, but some insurance providers have started to collect regular odometer readings to verify the risk.Odometer-based systems
Cents Per Mile Now (1986) advocates classified odometer-mile rates, a type of usage-based insurance. After the company's risk factors have been applied, and the customer has accepted the per-mile rate offered, then customers buy prepaid miles of insurance protection as needed, like buying gallons of gasoline (litres of petrol). Insurance automatically ends when the odometer limit (recorded on the car's insurance ID card) is reached, unless more distance is 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, to steal of continuous protection while paying for only the 2000 in the 35000 to 37000 range on the odometer, the resetting would have to be done at least nine times, to keep the odometer reading within the narrow 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 the need for administratively cumbersome and costly GPS 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, the Progressive Insurance company started a pilot program in Texas, in which drivers received a discount for installing aOBDII-based system
The Progressive Corporation launched Snapshot to give drivers a customized insurance rate based on recording how, how much, and when their car is driven."Snapshot, Snapshot Discount: Pay As You Drive (PAYD)"Credit ratings
Insurance companies have started using credit ratings of their policyholders to determine risk. Drivers with good credit scores get lower insurance premiums, as it is believed that they are more financially stable, more responsible and have the financial means to better maintain their vehicles. Those with lower credit scores can have their premiums raised or insurance canceled outright. It has been shown that good drivers with spotty credit records could be charged higher premiums than bad drivers with good credit records.Behavior-based insurance
The use of non-intrusive load monitoring to detect drunk driving and other risky behaviors has been proposed. A US patent application combining this technology with a usage based insurance product to create a new type of behavior based auto insurance product is currently open for public comment on peer to patent.Repair insurance
Auto repair insurance is an extension of car insurance available in all 50 of the United States that covers the natural wear and tear on a vehicle, independent of damages related to a car crash. Some drivers opt to buy the insurance as a means of protection against costly breakdowns unrelated to a crash. In contrast to more standard and basic coverages such as comprehensive and collision insurance, auto repair insurance does not cover a vehicle when it is damaged in a collision, during a natural disaster or at the hands of vandals. For many it is an attractive option for protection after the warranties on their cars expire. Providers can also offer sub-divisions of auto repair insurance. There is standard repair insurance which covers the wear and tear of vehicles, and naturally occurring breakdowns. Some companies will only offer mechanical breakdown insurance, which only covers repairs necessary when breakable parts need to be fixed or replaced. These parts include transmissions, oil pumps, pistons, timing gears, flywheels,See also
* Alcohol exclusion laws * Assigned risk * Automobile costs * Damage waiver for rental cars *References
External links
* {{Authority control Types of insurance Car costs