Explain automobile insurance policy.

Automobile insurance is a contract for an automobile, in which one party gets into an agreement to pay for another party's fiscal loss during an event, such as, some damage or thefts. Automobile insurance insures from losses occurred due to automobile usage and provides fiscal security during an accident. Auto insurance provides an opportunity to save wealth of an insurance organisation. The chief strategy of automobile policy is to enhance the deductible amount of an insurance policy, which decrease premiums accordingly.

The Personal Auto Policy (PAP) is issued to licensed individuals for
covering the risks. Many insurance companies make use of PAP for covering personal vehicles. PAP covers only personal vehicles. It covers other vehicles, such as, vans (weighing less than10,000 pounds), only if they are being used for installing and repairing furnished equipments.

Automobile coverage
Automobile coverage includes many declaration sections of an insurance contract. Any personal vehicle which is leased for minimum 6 months can be included in automobile coverage. All the new vehicles have the broadest coverage in declarations of an insurance contract (except collision
coverage). The policy holder needs to notify the insurer for collision coverage, irrespective of collision damage within 14 days.

The classification of some of the automobile coverages is as follows: 

Liability coverage - Liability coverage includes payments for damages and liabilities including defense costs that go beyond the liability limit (it is a single or spit limit). If the liability is covered, then the insurer has full rights to examine and solve the claims independent of the insured. A standard policy provides single limit for all the liability coverage. With the help of endorsements, many of policy holders choose split limit. Split limit splits the liability limit into three parts - limit for every person, property damage limit and total limit.

For example, say if a person injures 3 people, Rs. 25,000 damage is caused for the car, first person is brutally injured and needs treatment worth Rs 1,25,000, second person moderately injured requires Rs 75,000 and third person who is injured requires Rs 50,000, then the policy covers a single limit of Rs. 3,00,000 and covers all the costs of injury. 

Medical payment coverage - This provides coverage for medical payments for injury of an insured driver and passengers in the event of a loss. It offers financial protection to the driver when personal health insurance and/or personal injury protection is not sufficient to pay medical expenses for the driver and/or passengers. 

Uninsured motorists coverage - Many states need drivers to have license in order to have minimum amount of automobile insurance. Uninsured motorists coverage includes the insured persons, if they undergo damages due to uninsured motorists (like certain drivers without insurance or hit-run drivers or drivers insured with bankrupt insurance companies). Therefore, if an X person is injured by some vehicle that is insured but has no coverage for damages, then X can claim the amount for his injury. Damage coverage for personal automobiles - The two types of
automobile coverages are:

o Collision coverage - Collision coverage covers the damage caused because of the collision of a vehicle with other vehicle or object. Such damage, is deductible.

o Comprehensive coverage - Comprehensive coverage covers the damage caused from missiles or any falling object, thefts, earthquakes, windstorms or floods. This damage is not deductible.

If the vehicle needs repair, the insurer uses cheaper ‘after - market parts’ (unless the vehicle is new). If the insured persons prefer OME (Original Manufacturer’s Equipment) parts for older vehicles, then they should pay for the betterment by paying the difference between OME part and the aftermarket parts.

Responsibilities after an accident
According to the insurance contracts, the insured person has some responsibilities with respect to the event of loss, as it can nullify the policy. The insured person should protect the property from damage, and insurer will pay the reasonable costs. The insured person co-operates with the insurer by providing the evidence and furnishing witnesses. If the loss has occurred due to a collision with another vehicle, then the insured person must notify the police soon after the accident.