Introduction
Auto insurance (also known as car insurance, automobile insurance, motor insurance, vehicle insurance etc) is a contract between vehicle owner and the insurance company in which the owner agrees to pay certain amount of premium and insurance company agrees to pay the losses in case of accident or damage. Therefore, it provides financial protection against damage or injury in case of accident, theft, vandalism etc. .
Advantages Of Auto Insurance
The main benefits or advantages of auto insurance can be pointed out as follows:
1. Provides Financial Protection
One of the key benefits of auto insurance is that it provides financial protection for unforeseen situations or events such as accident, fire, vandalism etc. So, it is very important for vehicle owners to purchase auto insurance policy.
2, Covers Medical Costs
Auto insurance covers medical costs for driver and passengers. So, the owner of the car can save huge amount of money.
3. Compliance With The Law
In many countries auto insurance is a legal requirement. Therefore, it helps to avoid fine and penalties.
4. Mental Satisfaction
Another advantage of car insurance is that it gives mental satisfaction to the owner because he/she will not be responsible for repair and maintenance in case of accidents or other unforeseen events because it provides repair coverage.
5. Third Party Liabilities Coverage
Auto insurance protects the owner if the car involved in an accident and caused damage or injury to the third party. So, third party liabilities can be covered by auto insurance.
6. No Claim Bonus
A car owner can enjoy no claim bonus if he/she is eligible. It is a type of discount provided by the insurance company at the time of renewal. Owner of the vehicle can get this discount if there is no insurance claim in the previous period.
Disadvantages Of Auto Insurance
The main drawbacks or disadvantages of auto insurance can be pointed out as follows:
1. Higher Costs
Car insurance premium is determined on the basis of type of vehicle, driving experience and history of the driver, location etc. So, it may create financial burden to the owner.
2. Complex To Understand
There are many insurance companies providing auto insurance service in the market. They offer different coverage and schemes that creates confusion and complexity. It will be difficult for the car owners to choose right company.
3. Lengthy Process
Another notable disadvantage of auto insurance is that it takes a long time to settle the claim amount. Lot of formalities and different processes make it lengthy and complex.
4. No Full Coverage
Auto insurance may not cover all types of damages (although companies promised at the time of selling car insurance policy). It may create frustration and anger to the vehicle owners.
Also Read
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7 proven tips to save money on car insurance premiums
Difference between comprehensive and third-party insurance
Advantages and disadvantages of comprehensive car insurance
5. Unused Services
Insurance companies may add hidden costs for unnecessary services that makes insurance policy more expensive.
Pros And Cons Of Auto Insurance In Brief
Pros:
- It provides financial protection against accidents and other unforeseen events.
- It gives peace of mind to the car owner
- It provides third party liabilities incase of injury or damages caused by accident
- It covers medical costs and repair and maintenance expenses
- It helps to keep car in good condition
- It provides no claim bonus
Cons:
- It is complex and time consuming process
- It does not provide full coverage
- Extra costs are charged for unused benefits
- Generally there is poor customer support
- Companies may pay you less than the claimed amount
