You could be fined or even lose your driving license if you drive on the public roads without insurance if you own a vehicle. Motor Traffic Acts are mandatory in many countries. Car drivers must have at least third-party coverage. In other words, you must have insurance if you drive a car.
There are many types of insurance products on the market. The first is the insurance required to drive legally on the road. The second is the insurance which can save your life or other valuables such as your home and personal possessions. These policies, while not mandatory, are a good idea and will help you live a stress-free life.
These policies fall under two broad categories: general and life insurance. You will need to pay a premium when you purchase any of these policies. The premium amount for the first policy is set at the time you buy it and depends on several factors like your age, sex status, profession, health, etc. This premium amount does not change each year, unlike general insurance policies. Car insurance covers natural disasters such as floods, lightening, and third-party damage. It doesn’t cover normal wear and tear or depreciation.
These claims, as well as any general policy such home or travel insurance, are subject to the same premium that is set by the company. Car insurance premiums are determined based on make, model, year, and coverage history. Example: A Mercedes-Benz car will have a higher premium. If the car is used commercially, such as a taxi, the car’s exposure to dangers will also increase. A young owner who owns a large car or has a history of serious accidents will be charged a higher premium than a more experienced owner who has had no accidents.
The company must have sufficient funds to pay the losses of the insured. The company then pays out the premium pool from all its insurers to compensate for the loss they suffered.
A company cannot provide 100 percent coverage. They want their clients to understand their responsibility and impose a standard excess’. A majority of these policies, including travel insurance and car insurance, include an excess element. The policy holder pays an excess towards any loss that occurs while making a claim. This is called a mandatory excess. The company may also levy a voluntary excess if the customer agrees to cover the claim in full and is willing to pay more than the compulsory excess. This reduces the annual premium payment.
These premiums for the general category are set annually and can vary depending on how many claims are made each year. These companies will also offer a “no-claims discount” to car insurance policy holders who have not filed a single claim in the past twelve months. This allows policy holders to receive a discount on the next annual premium. This discount increases with the lengthening of their non-claim period. The policy holder who has to file a claim within a 12-month period will receive a reduced discount on their next renewal.
