Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is insurance for automobile, , , and other road vehicles. Its primary use is to provide financial protection against physical damage or bodily injury resulting from traffic collisions and against legal liability that could also arise from incidents in a vehicle. Vehicle insurance may additionally offer financial protection against theft of the vehicle, and against damage to the vehicle sustained from events other than traffic collisions, such as vandalism, weather or , and damage sustained by colliding with stationary objects. The specific terms of vehicle insurance vary with legal in each region.
History
Widespread use of the motor car began after the First World War in urban areas. Cars were relatively fast and dangerous by that stage, yet there was still no compulsory form of car insurance anywhere in the world. This meant that injured victims would rarely get any compensation in a crash, and drivers often faced considerable costs for damage to their car and property.
A compulsory car insurance scheme was introduced in the United Kingdom with the Road Traffic Act 1930. This ensured that all vehicle owners and drivers had to be insured for their liability for injury or death to third parties while their vehicle was being used on a public road.
Public policies
In most jurisdictions, it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the driver; however, the degree of each varies greatly.
Several jurisdictions have experimented with a "pay-as-you-drive" insurance plan which utilizes either a tracking device in the vehicle or vehicle diagnostics. This could address issues of uninsured motorists by providing additional options and also charge based on the distance driven, which could theoretically increase the efficiency of the insurance, through streamlined collection.[Wenzel T. (1995). Analysis of national pay-as-you-drive insurance systems and other variable driving charges. Lawrence Berkeley Lab., CA.]
Australia
In
Australia, every state has its own
Compulsory Third-Party (CTP) insurance scheme. CTP covers only personal injury liability in a vehicle crash.
Comprehensive and
Third-Party Property Damage, with or without Fire and Theft insurance, are sold separately.
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Comprehensive insurance covers damages to third-party vehicles, other third-party property and the insured vehicle.
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Third-Party Property Damage insurance covers damage to third-party property and vehicles, but not the insured vehicle.
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Third-Party Property Damage with Fire and Theft insurance covers the insured vehicle against fire and theft as well as damage to third-party property and vehicles.
Compulsory Third-Party Insurance
CTP insurance is compulsory in every state in Australia and is paid as part of vehicle registration. It covers the vehicle owner and any person who drives the vehicle against claims for liability for death or injury to people caused by the fault of the vehicle owner or driver. CTP may include any kind of physical harm, bodily injuries and may cover the cost of all reasonable medical treatment for injuries received in the crash, loss of wages, cost of care services and, in some cases, compensation for pain and suffering. Each state in Australia has a different scheme.
Third-Party Property insurance or Comprehensive insurance covers the third party with the repairing cost of the vehicle, any property damage or medication expenses as a result of a crash by the insured. They are not to be confused with Compulsory Third-Party insurance, which is for injuries or death of someone in a motor crash.
In New South Wales, each vehicle must be insured before it can be registered. It is often called a 'greenslip',
A privately provided scheme also applies in the Australian Capital Territory through AAMI, APIA, GIO and NRMA. Vehicle owners pay for CTP as part of their vehicle registration.
In Queensland, CTP is included in the registration fee for a vehicle. There is a choice of private insurer – Allianz, QBE and Suncorp and price is government controlled.
In South Australia, since July 2016, CTP is no longer provided by the Motor Accident Commission. The government has now licensed four private insurers – AAMI, Allianz, QBE and SGIC – to offer CTP insurance SA. Since July 2019, vehicle owners can choose their own CTP insurer and new insurers may also enter the market.
There are three states and one territory that do not have a private CTP scheme. In Victoria, the Transport Accident Commission provides CTP through a levy in the vehicle registration fee, known as the TAC charge. A similar scheme exists in Tasmania through the Motor Accidents Insurance Board.
Bangladesh
For all types of motor insurance policies in
Bangladesh, the limit of liability has been fixed by the law. Currently, the limits are too low to compensate the victims. In respect of Act Only Liability Motor Vehicle Insurance, the compensation for personal injuries and property damage to third parties is BDT 20,000 for death, for severe injury, for injury, and for property damage. The limits are under review by the governmental bodies.
Canada
Several Canadian provinces (
British Columbia,
Saskatchewan,
Manitoba and
Quebec) provide a public auto insurance system while in the rest of the country insurance is provided privately. The third-party insurance is privatized in Quebec and is mandatory. The province covers everything but the vehicle(s).
Basic auto insurance is mandatory throughout
Canada (with some exceptions, such as government vehicles
) with each province's government determining which benefits are included as minimum required auto insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland and Labrador.
All provinces in Canada have some form of no-fault insurance available to crash victims. The difference from province to province is the extent to which tort or no-fault is emphasized. International drivers entering Canada are permitted to drive any vehicle their licence allows for the three-month period for which they are allowed to use their international licence. International laws provide visitors to the country with an International Insurance Bond (IIB) until this three-month period is over in which the international driver must provide themselves with Canadian Insurance. The IIB is reinstated every time the international driver enters the country. Damage to the driver's own vehicle is optional – one notable exception to this is in
Saskatchewan, where SGI provides collision coverage (less than a $1000
deductible, such as a collision damage waiver) as part of its basic insurance policy.
In
Saskatchewan, residents have the option to have their auto insurance through a tort system but less than 0.5% of the population have taken this option.
[ Insurance Bureau of Canada . Ibc.ca (1 January 2003).]
Facility insurance policies are offered by the "facility association residual market" (or "FARM"), as a last resort since auto insurance is mandatory in Canada, for private and commercial high-risk drivers who cannot buy a policy in the voluntary market (regular auto insurance).
China
Traffic Compulsory Insurance provides protection in the event of third party injuries, third party property losses, etc. The minimum liability cover is RMB180,000 (US$) for death and injury/per crash, RMB18,000 (US$) for medical expense, and RMB2,000 (US$) for physical loss.
Additional 3rd Party Liability Insurance also known as Commercial Motor Insurance provides extra cover up to RMB10,000,000 (US$) excluding the driver and passengers. Driver and Passenger insurance covers the driver and passengers, whilst Vehicle Damage and Theft Insurance covers vehicle damage and the objects contained inside.
Excess Waiver Insurance is an additional option that waives any deductibles.
Some differences apply in different regions:
Hong Kong
According to section 4(1) of the Motor Vehicles Insurance (Third-Party Risks) Ordinance (Cap. 272 of the Laws of Hong Kong), all users of a car, include its permitted users, must have insurance or some other security with respect to third-party risks. Third party insurance protects the policyholder against liability of death or bodily injury to third party up to and/or damage to third party property up to as a result of crash arising out of the use of the insured vehicle.
Comprehensive Motor Insurance is also available.
Macau
The mandatory minimum legal requirement Third Party Liability ("TPL") Cover is MOP1,500,000 per crash and MOP30,000,000 per year, protecting against the legal liability arising from a traffic crash causing loss and damages to any third party.. Comprehensive Motor Insurance is also available.
European Union
In the
European Union, from the introduction of Directive 1972/166/EEC, insurance cover is mandatory, with the statutory minimum cover being revised every five years, the most recent revision, via Directive (EU) 2021/2118 (the
‘‘Motor Insurance Directive’’ or
‘‘MID’’) requires:
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in the case of personal injury, a minimum amount of cover of €1,300,000 (US$) per injured party or €6,450,000 (US$) per claim, irrespective of the number of parties;
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in the case of damage to property, €1,300,000 (US$) per accident.
In some European languages, comprehensive non-mandatory insurance is known as casco (Casualty and Collision).
Germany
Since 1939, it has been compulsory to have third-party personal insurance before keeping a motor vehicle in all federal states of
Germany.
In addition, every vehicle owner is free to take out a comprehensive insurance policy. All types of car insurance are provided by several private insurers. The amount of insurance contribution is determined by several criteria, like the region, the type of car or the personal way of driving.
The minimum coverage defined by German law for car liability insurance / third-party personal insurance is €7,500,000 for bodily injury (damage to people), €500,000 for property damage and €50,000 for financial/fortune loss which is in no direct or indirect coherence with bodily injury or property damage.
Hungary
Third party vehicle insurance is mandatory for all vehicles in
Hungary. No exemption is possible by money deposit. The premium covers all damage up to
Hungarian forint 500m (about €1.8m) per crash without deductible. The coverage is extended to
Hungarian forint 1,250m (about €4.5m) in case of personal injuries. Vehicle insurance policies from all EU countries and some non-EU countries are valid in Hungary based on bilateral or multilateral agreements. Visitors with vehicle insurance not covered by such agreements are required to buy a monthly, renewable policy at the border.
Ireland
The Road Traffic Act, 1933 requires all drivers of mechanically propelled vehicles in public places to have at least third-party insurance, or to have obtained exemption – generally by depositing a (large) sum of money to the High Court as a guarantee against claims. In 1933, this figure was set at
Irish pound15,000.
[ Road Traffic Act, 1933, Section 61. 193.178.1.79.] The Road Traffic Act, 1961
[ Road Traffic Act, 1961 . 193.178.1.79 (29 July 1961).] (which is currently in force) repealed the 1933 act but replaced these sections with functionally identical sections.
From 1968, those making deposits require the consent of the Minister for Transport to do so, with the sum specified by the Minister.
Those not exempted from obtaining insurance must obtain a certificate of insurance from their insurance provider, and display a portion of this (an insurance disc) on their vehicles' windscreen (if fitted).
Those injured or suffering property damage/loss due to uninsured drivers can claim against the Motor Insurance Bureau of Ireland's uninsured drivers fund, as can those injured (but not those suffering damage or loss) from hit and run offences.
Italy
The law 990/1969 requires that each motor vehicle or trailer standing or moving on a public road have third-party insurance (called RCA, Responsabilità civile per gli autoveicoli). Historically, a part of the certificate of insurance must be displayed on the windscreen of the vehicle. This latter requirement was revoked in 2015, when a national database of insured vehicles was built by the Insurance Company Association (ANIA,
Associazione Nazionale Imprese Assicuratrici) and the National Transportation Authority (
Motorizzazione Civile) to verify (by private citizens and public authorities) if a vehicle is insured. There is no exemption policy to this law disposition.
Driving without the necessary insurance for that vehicle is an offence that can be prosecuted by the police and fines range from 841 to 3,287 euros. Police forces also have the power to seize a vehicle that does not have the necessary insurance in place, until the owner of the vehicle pays a fine and signs a new insurance policy. The same provision is applied when the vehicle is standing on a public road.
Minimal insurance policies cover only third parties (including the insured person and third parties carried with the vehicle, but not the driver, if the two do not coincide). Third parties, fire and theft is a common insurance policy, while the all-inclusive policies ( kasko policy) which include also damages of the vehicle causing the crash or the injuries. It is also common to include a renounce clause of the insurance company to compensate the damages against the insured person in some cases (usually in case of DUI or other infringement of the law by the driver).
The victims of crashes caused by non-insured vehicles could be compensated by the Road's Victim Warranty Fund ( Fondo garanzia vittime della strada), which is covered by a fixed amount (2.5%, as 2015) of each RCA insurance premium.
Netherlands
Third-party vehicle insurance is a mandatory requirement for every vehicle in the
Netherlands.
This obligation is mandatory based on article 2 of the Wet aansprakelijkheidsverzekering motorrijtuigen.
When a vehicle is not insured the owner will receive a fine from the RDW ().
The third-party vehicle insurance is called a WA verzekering where WA stands for Wettelijke aansprakelijkheid which means legal liability. In general there are three types of auto insurance in the Netherlands: WA verzekering (liability insurance), WA beperkt casco (limited frame coverage), and WA volledig casco (full frame coverage). Limited frame and full frame coverage will provide more coverage against certain additional risks which are not covered by the mandatory legal third-party coverage. For example limited frame coverage will provide coverage against damage caused by the weather such as storm and flooding. Also fire damage and theft of the car is covered. Full frame coverage will provide coverage against all risks mentioned plus damage to the car caused by the driver himself.
Spain
Each motor vehicle on a public road is required to have third party insurance (called Seguro de responsabilidad civil).
Police forces have the power to seize vehicles that do not have the necessary insurance in place, until the owner of the vehicle pays the fine and signs a new insurance policy. Driving without the necessary insurance for that vehicle is an offence that will be prosecuted by the police and will receive a penalty. The same provision is applied when the vehicle is standing on a public road.
The minimum insurance policy covers only third parties (including the insured person and third parties carried with the vehicle, but not the driver, if the two do not coincide). Third parties, fire and theft is a common insurance policy.
Victims of accidents caused by non-insured vehicles may be compensated by a Warranty Fund, which is covered by a fixed amount for each insurance premium.PPcn
