Car Insurance

Car Insurance Policies Around the World

In many countries, it is compulsory to have Car Insurance before using or keeping cars on public roads. Most car insurance companies relate insurance to both the car and the driver, however the degree of each varies greatly.

In Australia, Third Party Car Insurance from the State Government Insurance Corporation (SGIC) is included in the car licence registration fee.

In the Canadian provinces of British Columbia, Saskatchewan, Manitoba and Quebec, the province provide a public car insurance system, while in the rest of the country car insurance is provided privately. Basic car insurance is mandatory throughout Canada with each province's government determining which benefits are included as minimum required car insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland and Labrador.

In South Africa a percentage of the money from petrol goes into the "Road Accidents Fund", which goes towards compensating third parties in accidents.

UK law is defined by the The Road Traffic Act 1988, which was last modified in 1991. The act requires that some motorists either be insured, have a security, or have made a specified deposit (£500,000 as of 1991) with the Accountant General of the Supreme Court, against their liability for injuries to others (including passengers) and for damage to other persons' property resulting from use of a vehicle on a public road or in other public places.

United States

In the United States, auto insurance is compulsory in most states. Enforcement of the requirement varies from state to state. The state of New Hampshire, does not require motorists to carry liability insurance, while in Virginia residents must pay the state a £500 annual fee per vehicle if they choose not to buy liability insurance.

Types of Car Insurance Cover

Comprehensive Car Insurance Cover

If you select a Comprehensive policy, you would normally be covered for everything that a Third Party Fire and Theft policy would cover, plus accidental damage to your own vehicle, loss or damage to personal effects in the vehicle up to a stated limit and replacement of broken/damaged windscreens. Extras such as 'personal accident' benefits or 'medical expenses', are often included in comprehensive policies.

Third Party Fire and Theft Car Insurance Cover

This type of policy covers you against any claim for personal injury to an unlimited amount. Third party property damage claims are also covered, usually up to a limit of £20M. There is no cover for damage to your car.

In addition, insurers will pay up to the market value of your car if it is lost or destroyed following fire or theft. Typically the first £100 is excluded.

What Affects Your Car Insurance Premium

Depending on the country, the insurance premium can be either set by the government or determined by the insurance company in accordance to a framework of acts and regulations set by the government. The insurer generally has more freedom to set the price on physical damage coverages than on mandatory liability coverages.

When the premium is not set by the government, it is usually made up from 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. Factors can include the coverage selected (deductible, limit, covered perils), the car characteristics, the profile of the driver such as age, gender, driving history and the usage of the car.

Gender

On average male drivers more miles per year than women do, and so have a proportionally higher accident involvement at all ages. Insurance companies cite women's lower accident involvement in keeping the youth premium lower for young women drivers than for their male counterparts. Adult rates are generally unisex.

Age

Teenage drivers who have no driving history will have higher car insurance premiums. Young drivers are often offered discounts if they undertake further driver tuition on recognised courses, such as the Pass Plus scheme in the UK. 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 reflecting lower average miles driven by this age group.

Distance

Some car insurance schemes do not differentiate in how much the car is used. However, methods to 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.