There are several types of motor insurance. And each of these existing types depend on the level of coverage if offers. This article is for the purpose of discussing the various types of motor insurance. But before we do this, we shall examine the meaning of Motor insurance.
MEANING
Motor Insurance refers to insurance policies that make provision for financial assistance in the event of accidents involving your car and sometimes, your bike. Thus, it is safe to place motor insurance into three categories and they include:
Car Insurance: This is the category for personal four-wheeler vehicles. In other words, it is only personal four-wheeler cars that enjoy insurance coverage under this category.
Two- Wheeler Motor Insurance: This is the category for the coverage of personal two-wheeler vehicles. On this category includes bikes and scooters.
Commercial Motor Insurance: as the name implies, this is the category of motor insurance available for vehicles that are for commercial use only. This policy ensures that your commercial motor vehicles stay in the best of working condition by the provision of financial indemnity in the event of accidents resulting in damages.
Types of Motor Insurance
They are three major types of motor insurance and these types are classified on the basis of the level of coverage it offers. Similarly, there are still other additional types of motor insurance policies apart from the three major ones. We shall discuss these types here under.
Comprehensive Motor Insurance
Third Party Liability Motor Insurance
Collision Damage Motor Insurance
Comprehensive policy
Just like the name implies, comprehensive motor insurance policy is the type of policy that provides all round motor insurance coverage. This is unlike the third party liability motor insurance policy that only affords coverage to third parties.
Comprehensive policy does not only provide coverage to third parties but also pays the expenses incurred in the repairing or replacing the policyholder’s vehicle in the event of an accident.
In addition to the above, comprehensive policy also provides a payment of indemnity in the event the policyholder’s vehicle sustains damage due to fire, man-made calamities, natural calamities, riots, etc.
Similarly, the policy may also provide for total replacement in the event the policyholder’s car is completely lost, damaged or stolen.
Lastly, it is advisable that apart from the standard coverage for comprehensive policy, you can still buy several add-ons or additional policies with the comprehensive motor insurance policy that can make it better. Examples of these add-ons include breakdown assistance, consumable coverage, zero depreciation cover, engine and gear-box protection cover, etc.
Third-Party Liability Plan
This is the most basic type of motor insurance coverage. In fact, the third party liability plan is compulsory in almost all countries of the world. Thus, it serves as the minimum mandatory motor insurance requirement for all vehicle owners. Premiums for these policies are usually low as a result of the low payouts or indemnity.
Thus the third party motor insurance plans only pay the financial liability to the third-parties in the event of accidents or other eventualities. And this ensures that the vehicle owner do not face legal difficulties due to the accident.
It is worthy of note that this policy do not offer any financial assistance to repair the policyholder’s vehicle after accidents but only that of the third parties involved in the accident.
Collision coverage
Collision coverage is a type of motor insurance coverage that provides insurance coverage by paying for the costs of fixing our vehicles in the events of accidents resulting from collision with objects such as telephone pole or any other objects or inanimate objects and as well as damage from potholes. It helps to reimburse the Policyholder for the costs of repairing the vehicle.
It is the type of car insurance that pays the insured for the cost of repairing their personal cars as a result of no fault of their own or negligence. It is a form of car insurance that is usually bought by policyholders as an add-on to the main policy to protect drivers in the event of damage to their cars as a result of collision. It repays the expenses incurred in the fixing of the damages sustained by the insured car as a result of actual collision. Thus it does not cover damages as a result of vandalism or theft.
Additional Types of Motor Insurance
Umbrella Policy
This can provide coverage regarding large liability claims. For instance, if you cause an accident while driving, the other driver might make a claim against you for $750,000. Your motor insurance policy only covers up to $500,000. The umbrella policy covers the difference.
Medical payment coverage and personal injury protection
This coverage can help pay for medical bills you might incur if you’re involved in an accident. It might also cover your passengers’ expenses and pay for hospital visits, surgery, and doctor’s bills.
Uninsured motorist/ underinsured motorist
Even though liability coverage is a legal requirement, some people may drive without it. This policy covers anything the other driver doesn’t carry if they are at fault for the accident. Some states require motorists to carry this coverage.
Underinsured motorist is similar to uninsured coverage. This policy covers damages or injuries you sustain from a motorist who doesn’t carry enough coverage.
Motorcycle coverage
This is a policy specifically for motorcycles because auto insurance doesn’t cover motorcycle accidents.
