Motor insurance provides cover for financial losses due to an accident to the motor vehicle and the liabilities arising out of the accident to the insured. The first car was made in 1886, and the first auto insurance policy was introduced almost a decade later.
The initial cover provided was third party insurance. Subsequently, comprehensive insurance was introduced. Later on, with the rapid industrialization, the number of vehicles on the road increased, paving the way for compulsory third-party insurance.
The compulsory third-party insurance provided protection to the insured against the financial liabilities involving third parties. The increasing population, coupled with industrialization, allowed the auto industry to grow tremendously.
The use of vehicles to transport people and properties helped the development of the automobile industry. The growing automobile industry needed insurance as part of the mandatory requirements and secure finances from the banks and other financial institutions.
Motor insurance has grown from a basic third-party only insurance to a variety of coverage options. You can get no down payment car insurance or instant car insurance with no deposit for those who don’t have a financial situation to afford a big payment upfront. Vehicle insurance provides different types of benefits to various sectors of the economy.
Let us have a look at some of the benefits offered by vehicle insurance:
Absorbing the cost of the significant losses due to the operation of peril covered
We are living in an age of unstable economic conditions with increasing inflation. In such a scenario, the insured is the biggest beneficiary of motor insurance. It has often been observed that due to major accidents or losses, and in the absence of insurance coverage, many people have lost all of their life savings to pay for the losses. Many have sold their ancestral properties to pay the claims arising out of third-party liabilities.
This clearly puts a victim in a terrible situation, and sometimes they may end up taking loans, which may require a lifetime to settle them. An insurance policy will definitely help in avoiding bankruptcy. It helps safeguard the financial well-being of the insured their families despite a significant vehicular accident occurring to a vehicle owned by the insured.
Need not remain in a planning mode throughout a lifetime
Accidents or loss situations can happen at any time, but you don’t need to worry for a lifetime. If an annual budget is planned, the insurance will take care of the significant expenses due to the eligible loss due to an insured risk.
Even one event during a decade may bankrupt an individual or an organization. You don’t need to keep saving to make sure there is enough money available for the unfortunate event of loss or accident. By purchasing the minimum third-party insurance, the insured will be able to protect themselves against a huge potential loss.
Let’s see an example: James, a 35-year-old factory worker, earns $ 2,500 a month and owns an old 2013 Camry, a model valued at $ 8,000. James is not concerned with insuring his car, as he believes that, in the event of an accident, he will be able to pay $ 8,000. He has minimal liability insurance with one of the leading insurers in the insurance market, let’s say Young America Insurance Company.
The cost of his insurance is $400 per year
If he bought a policy for ten years, he could pay insurers an amount of US $ 4,000. However, at some point in those ten years, he, unfortunately, is involved in a major accident that has damaged a high-value Porsche valued at $120,000. If he is fully responsible for the car’s damage, then the liability will be approximately $ 120,000.
Considering his monthly salaries, the amount of the claim is huge and unpredictable. However, if he buys the right insurance, he doesn’t have to worry. The availability of insurance will help you plan for savings for the known expense rather than being hit by unexpected claims arising from car use.