Car insurance

Car insurance is a type of insurance purchased for cars. It is often referred to as motor insurance, vehicle insurance or motor insurance. Basically, three different items can be covered by car insurance: the insured party, the insured vehicle, and third parties. Always read the fine print of a car insurance policy and make sure that you understand under which circumstances each item is covered.  The primary goal of car insurance is to provide protection against losses caused by traffic accidents, but a car insurance policy can be much broader than this and cover other types of losses as well. It can for instance protect against theft, fire damage and vandalism.

In many parts of the world, car insurance is mandatory and the owner of a motorised vehicle is required by law to purchase car insurance before using it on public roads. In South Australia, you automatically pay for third party personal insurance when you pay your license registration fee. (The insurance always is issued by the State Government Insurance Corporation.) South Africa has opted for another solution and when you pay for petrol in this country, a percentage of the money goes into the Road Accidents Fund. This Road Accidents Fund will then compensate third parties after car accidents. In the United States, car insurance is compulsory in most states, but the penalty and the enforcement of the regulation varies significantly. The extent of the mandatory car insurance policy also varies from state to state. Third party insurance is required by most states, while coverage against loss of or damage to your own car tend to be is optional. It is therefore very important to look up the exact requirements for your particular state before you purchase car insurance. If you are a Virginia resident, you are for instance required to have liability insurance for your car or pay a $500 fee to the state each year for each uninsured car.

The penalty for driving an uninsured car on public roads varies a lot from country to country, and can also vary from region to region within countries. The most common punishments are fines, often combined with revocation or suspension of license and/or registration. There is however parts of the world, including some U.S. states, where you can face jail time for not purchasing enough car insurance.  

Before purchasing car insurance, it is important to find out how large the excess will be. The excess payment, also known as the deductible, is a fixed amount of money that you have to pay yourself each time you receive compensation from the insurance company. The excess can be a fixed sum of money or a certain percentage of the total compensation. If the accident was caused by another driver (and his or her insurer accepts this fact), you can reclaim your excess payment from the driver's insurer. One way of reducing the insurance premium on a car insurance policy is to agree to a higher excess than the compulsory excess level offered by your insurer. Since a higher excess will reduce the financial risk for the insurer the insurance company will be able to offer you a lower premium. Only enter such an agreement if your financial situation allows you to actually make a higher excess payment.