What is Insurance and Car Insurance ?

What is Insurance and Car Insurance ? (Car Insurance Explained)

Insurance is the procedure through which people having suffered some kind of financial loss can recover their losses. It is based upon a contract entered into by a person who faces this risk and a company willing to compensate the victim should the situation arise. This contract is called a ‘policy’ and the person signing it is the ‘policyholder’. If any of the situations stated in the policy occur, the insurance company compensates the policyholder accordingly.The policyholder and the insurance company agree upon which circumstances (or conditions) the policy will cover. The policyholder is required to pay a fixed amount (premium) to the insurance company.

There are a number of areas insurance covers. The main insurance fields are home, motor and life insurance. Car insurance covers situations where the car (or cars) of the policyholder may incur some sort of financial loss. Home insurance deals with compensation for events which may damage either the house of the policyholder or the contents of that home. Life insurance ensures that upon the death of the policyholder, a named person (a dependant) will receive a cash amount.
Categories of Car Insurance Around the World:
Bodily injury and liability – In a situation where another person is injured due to your negligence, the insurance pays for the medical and legal costs incurred. There is a stated maximum amount of compensation per person and per claim that can be given.

Car Rental – This pays for a rental car for the policyholder if their car is being repaired after damages.
Collision – Payment is made after any collision even if the collision was the fault of the policyholder.
Full Glass – In some places comprehensive insurance only deals with windshield damage, and not any other windows. ‘Full Glass’ ensures that any broken glass is paid for.
Comprehensive – This covers any loss due to fire, theft, accident, or Acts of God.
Gap Insurance – This category is only relevant to leased cars and is used if you end up owing more on the lease than the car is worth.
Medical – This covers the medical expenses of the policyholder and his passengers.

Liability – If any stationary objects or vehicles were damaged and the policyholder is at fault, the policy holder will get compensation.
No-Fault – Similar to ‘Medical’, but can be used for pedestrians.
Out-of-Country – This is important for those who take their vehicles abroad frequently. Normal insurance will not cover claims made outside of the country where the policyholder lives.
Towing – This pays for any towing expenses incurred, but is obsolete due to the introduction of car recovery companies such as the RAC and the AA.