How car insurance works definition deductibles insurance coverage types

What is car insurance?

Car insurance is a contract between the insured and the insurer – in this case, the owner of a vehicle and the company that provides coverage in the event of an accident. In this article we will give you the answer of the question that How car insurance works?

Anyone who takes out car insurance pays a predetermined amount per month or year to an insurance company and, in case of need, receives partial or total coverage to cover damage to the car or even to third parties involved in problems with the insured car. .

Is it worth having car insurance?

Short answer: yes. Anyone who owns a car should count the insurance expense in the monthly budget, as expenses in the event of an accident are usually high. The average cost of each accident on federal highways, for example, is over R$72,000, according to an IPEA survey released in 2015 .

However, to really count, you need to check the contract clauses and understand in which situations you will be covered.

How does car insurance work?

Insurance must be contracted with a broker or directly with the insurance company.

It involves a contract that stipulates, among other things:

  • Payment of a monthly or annual fee;
  • Driver’s rights and what’s included;
  • The amount of the deductible (up to how much the driver covers before being reimbursed).

Driver profile

Before choosing the type of insurance, the insurer will identify your profile. It is based on personal information and the use of the car that she will try to find options that suit her needs and that cover the main risks. This profile analysis also determines the final price of the insurance.

The criteria involved in the formulation include:

  • the age of the driver;
  • the value of the car;
  • your time as a licensed driver;
  • the mileage you usually run;
  • how many people will use the vehicle;
  • the main purposes that the car has;
  • and the place the vehicle will be parked.

In addition, the scope of insurance also influences the time of hiring. The more comprehensive the contract, the higher the amount charged at the end (see below).

What are car insurance deductibles?

The deductible is one of the rules for contracting auto insurance. It corresponds to the amount in money that the contractor (client) will have to pay if he is involved in an accident for which he is responsible.

According to the companies, having the franchise means that drivers do not take unnecessary risks, as they are also responsible for at least part of the costs.

If your deductible is R$1,500, this means that you will cover expenses up to that amount and the insurance company will cover the other costs up to the limit of your contract.

For example: you crashed the car and the body shop and mechanics were left at R$5,000. If the insurance deductible is R$1,500, then you will pay that amount and the insurance company will be responsible for the remaining R$3,500.

Each insurer has a deductible value and criteria for assessing its value.

There is no charge for the deductible in cases such as:

  • Need to use a winch;
  • Use of a spare car.

Types of car insurance coverage

1-car damage

Car damage is the most basic occurrence that an insurance will charge. This type of coverage includes several situations, even those beyond the driver’s control, such as fire, damage from floods, storms, lightning and hail.

Theft and theft, in addition to accidents and collisions involving the insured vehicle, are also considered damage to the car.

2-Damage to driver and passengers

Damage caused to the driver and passengers of the car has its own type of coverage.

This involves the damage caused to victims of accidents inside the insured car, such as collisions and rollovers. The coverage, in this case, extends to cases of disability and death of the occupants of the car.

3-damages to third parties

Finally, a part of how car insurance works concerns damage to third parties.

This specific type of coverage deals with the payment of expenses to people who suffer damage through the insured car. This is the case for victims of accidents and collisions that your car may have caused.

So far we have gone through the basics of car insurance, which are: how car insurance works and the main damages to consider in coverage. Finally, let’s talk about the types of insurance that will cover the different damages above.

Types of insurance

The insurance institution may offer a few different types of car insurance that include different coverages. They are often called:

  • comprehensive insurance;
  • insurance against theft and theft;
  • third party insurance;
  • and passenger accident insurance.

These four types of insurance have specific coverage and offer options and prices according to the types of claims insured.

1-comprehensive insurance

Comprehensive insurance is the most complete among the available modalities. This type of insurance charges the most occurrences and, consequently, is the most expensive.

Even so, it is important to point out that not every driver, according to their profile and use of the car, will be subject to all the occurrences that the comprehensive insurance covers.

In this case, the vehicle owners who benefit most from this model are those who drive a lot, who use the vehicle for travel and work.

Those who don’t make such intense use of their vehicle can continue researching how car insurance of another type works, one that covers most of the risks, but is not as complete as the comprehensive one.

2-Theft insurance

A less complete but still very popular type of insurance is theft and robbery insurance. 

Covering less than is comprehensive, this type of insurance can cater to drivers who want safety but pay less. An important feature of this modality is that the insured receives compensation only when his stolen or stolen vehicle is not found.

In addition, if additional coverage is not considered, damages of less than 75% of the vehicle’s value are borne by the contractor.

3-Third party insurance

The third type of car insurance is third-party insurance, also known as RCF-V (Optional Vehicle Liability). This type of coverage guarantees the insured against damages caused to other drivers.

It is this insurance that guarantees the expenses paid to other drivers, pedestrians and cyclists involved in accidents caused by the insured’s vehicle. The covered damages can still be material and physical or moral and personal.

4-APP coverage

Finally, there is also the type of insurance aimed at damage to vehicle passengers.

Also called APP coverage – Passenger Personal Accidents. This insurance is not intended to cover the damage suffered by the driver, but by the passengers of the car. It is in this modality that indemnities are generally covered in the event of accidental death and disability of passengers.

APP coverage is an insurance most used by professionals who use the car to work and transport people, such as taxi drivers and Uber drivers, for example.

It is from these four types of coverage that insurers guarantee security in case of the most varied occurrences. Each of them, of course, caters to specific situations, for each type of driver, car and budget.

And finally, all the attention is little when signing the contract. Read each clause carefully so you don’t lose out .

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