Auto insurance for cars

As a growing child, I was always of the idea that people need not purchase insurance premiums, that they were just in the business to cart away our money. My perception of it was that purchasing insurance is for mitigating risk, and the occurrence of the said risk is not certain, therefore if the risk doesn’t occur within the stipulated period, then the insurance company has no obligation to pay you back the money spent on the insurance premium. So I thought to myself, “Why then do we need to pay for insurance”.  A situation that occurred about 6 years ago changed my view of the subject matter.

Let me quickly narrate my ordeal to you. My father worked in a bank for over 22 years before he was laid off in 2012 as a result of an acquisition by another bank. Not to stray from the subject matter, let me briefly explain to you what happened to him that changed my perception of insurance and insurance business.

On one fateful day, as he was driving back from a stressful day of work, he was accosted by some armed men; they stood in front of his car, threatening him by pointing guns at the car’s windscreen. They kept screaming that if he moves any further they would gun him down. So my dad, afraid and befuddled, came to a halt. These armed men entered into his car and told him to go to the back seat, and then one of them took over the wheels. They were four in number, one driving, and another at the passenger’s seat in front, and the other two manning the doors so as not to allow my father escape by jumping out the door while the car was in motion.

While in motion, a discussion between the armed men and my father ensued. They told him that they were going for a robbery operation and he would follow them there. My father pleaded that they should kindly drop him off somewhere, as in Nigeria if that happens and they are caught by the police, he would be taken as one of them and the punishment they dish out to the armed men would be his lot also.

After much pleading, they finally agreed to let him be. They stopped at the roadside and threw him into the gutter. Then they took the car for the robbery operation. My father immediately went to a nearby police station to lodge his report in case the armed robbers are caught with his car. For a long time we heard nothing about the car, but about a month after we got news from the police that the car had been spotted at the outskirts of Lagos. We received the car in a terrible state; the armed robbers had been using it continuously for their operations.

We took the car for repairs, and we were billed about NGN250, 000 which is a lot of money. Thank God the car had an insurance policy, we called up our insurance company, and they assessed the damage and took over the liability. Hope you enjoyed that back story? Now let us take a look at the different types of car insurance coverage:

Liability insurance coverage

In Nigeria, it is called third party insurance. Most people opt for this kind of auto insurance coverage because it is relatively cheaper than other options such as the comprehensive insurance. Many people do not understand the intricate details of the third party insurance, they just subscribe to it because motor insurance is required by law. A liability insurance or third party insurance is basically insurance that covers damages or liability (property damage or medical bills resulting from injuries) to third parties. In the insurance agreement, you are the first party, the insurance company the second party and the third party is anyone else. In a situation where you have an accident with another person, and it is deemed that you were responsible for the crash, and both cars are badly damaged, the insurance company covers the damage to the third party (the other person) while you are left to repair your car yourself. This doesn’t really sound like the best option because there may be some situations whereby you are solely involved in a crash, for example with a tree, and you have to bear the cost of repairs all on your own.

Comprehensive insurance coverage

This in my own opinion is the best insurance coverage you can get for your car. The only catch is that it is pricey and more expensive than other types of insurance. The standout benefit of a comprehensive insurance is that in a case of damage, liability, theft , etc., the insurance company covers the loss. This might not be the case in liability or collusion insurance. From my story, it is really easy to deduce that the insurance coverage my father bought for his car was the comprehensive insurance. If he had gone with the liability insurance or any other type of auto insurance, he would have been left all alone to fix the damages to the car.

Collusion Insurance

Collusion insurance as the name implies covers collusion of cars. If you get this type of insurance coverage and your car is involved in collusion, the insurance company would bear the cost of repairs to your car. If the cost of repair exceeds the value of your car (termed “totaled” car), then the insurance company would pay the value of your car.

Uninsured driver coverage

Uninsured driver coverage is useful in a situation where you are involved in an accident with an uninsured driver who is responsible for the accident. it is also useful in accidents with drivers that have insurance coverage that falls below the state’s required minimum so as not to receive less than the required amount . The extent of coverage varies by state, it basically ranges from insurance of medical expenses of you and your passengers, with coverage for damages to the car.

Fire and theft coverage

This type of coverage covers damages as a result of fire, or if the car is stolen. Regarding the ordeal that my dad went through, this type of insurance coverage would have sufficed.

Personal Injury protection

This type of insurance coverage covers your medical bills resulting from auto accidents, the medical bills of your passengers, and other personal expenses including funeral cost in the case of death, and lost wages in the case of hospitalization. Personal injury protection is no story insurance because it pays no matter the person at fault for the accident. This type of coverage is not available in all the states of USA, but it is mandated in about 16 states. You should contact your insurance company or agent to find out if it is available in the state you live.