Auto insurance

'Vehicle insurance' (or 'Auto insurance', 'car insurance', 'motor insurance') is insurance consumers can purchase for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents. An insurance company may declare a vehicle totally destroyed ('totaled' or 'a write-off') if it appears replacement would be cheaper than repair.

Coverage levels

Insurance can cover some or all of the following items:

• The insured party
• The insured vehicle
• Third parties

Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

Public policy

In many countries it is compulsory to purchase auto insurance before driving on public roads. In the United States, penalties for not purchasing auto insurance vary by state, but often involve a substantial fine, license and/or registration suspension or revocation, as well as possible jail time in some states. Usually the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle. Typically, coverage against loss of or damage to the driver's own vehicle is optional – one notable exception to this is in Saskatchewan, where Saskatchewan Government Insurance provides collision coverage (less a $700 deductible) (such as a collision damage waiver) as part of its basic insurance policy. In South Australia Third Party Personal insurance from the State Government Insurance Corporation (SGIC) is included in the license registration fee. South Africa allocates a percentage of the money from petrol into the Road Accidents Fund, which goes towards compensating third parties in accidents. Most countries relate insurance to both the car and the driver, however the degree of each varies greatly.

Basis of premium charges

Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.

When the premium is not mandated by the government, it is usually derived from the calculations of an actuary? based on statistical data. The premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims. Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).

Gender

Men average more miles driven per year than women do, and have a proportionally higher accident involvement at all ages. Insurance companies cite women's lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts but adult rates are generally unisex. Mistaken reference to the lower rate for young women as “the women's discount” has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums. Ending the discount would have made no difference to most women's premiums. Changing to per-mile charges, however, would benefit anyone whose car was driven less than average, including the majority of women who are overcharged at current per-year rates.

Age

Teen drivers who have no driving record will have higher car insurance premiums. However young drivers are often offered discounts if they undertake further driver training on recognised courses, such as the Pass Plus scheme in the U.K. In the U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Senior drivers are often eligible for retirement discounts.

Distance

Some car insurance plans do not differentiate in regard to how much the car is used. However, methods of differentiation would include:

Reasonable estimation

Several car insurance plans rely on a reasonable estimation of the average annual distance expected to be driven which is provided by the insured. This discount benefits drivers who drive their cars infrequently but has no actuarial value since it is unverified.

Buying Auto Insurance on the Internet

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Although the Internet currently accounts for a relatively small percentage of total insurance sales, its influence in the marketplace is growing rapidly. Quoting agents are actively marketing their services to consumers via a growing number of Web sites. Quoting agents provide sample automobile insurance rates to Internet users who respond to various online questions. In addition, many insurance companies and traditional agents and brokers have their own Web sites providing pricing, service information and, sometimes, the means to complete an auto insurance purchase. Insurers with representative rates from Appendix I that provide rate quotes for a private passenger automobile policy on their Web sites are shown in the Notes to Rate Tables. The Insurance Department’s Web site also has a general listing of the web sites for regulated insurance companies.