Most people think that the clause in automobile insurance that states the insurance agency would replace the vehicle in case of theft is quite a complicated matter. The fact that your vehicle ages everyday has a profound bearing on it�s values or so-called Cash Value/Actual Cash Value in insurance terms. This ACV is determined by the Claim�s Adjuster by taking the replacement cost minus the depreciation which is determined through a table stating the amount or percentage of decrease in value the vehicle suffers per year of ownership.
The so-called replacement cost is determined if say a part of your vehicle is stolen, the adjuster(who is quite knowledgeable in the value of parts through experience and affiliation with auto supply shops) would give this value as the amount of money it would take to replace the said part with another of the same kind and value without deducting the depreciation value of the whole vehicle. That hopefully clears up some of the terms in the fine print of most auto insurance contracts, which by the way, “YOU SHOULD ALWAYS TAKE THE TIME TO READ” however dizzying it may be.
That can be influenced by many factors such as the age of the vehicle, the make and type, the amount of coverage you wish to take and the maximum amount of coverage. Though it is said to be not mandatory in the United States, Most have established sets of Minimum coverage qualifications except for a number of states which have different rates. There is actually a ratio that is generally applied with respect to Liability Coverage Limits such as 20/40/10 which in lay-man�s terms would translate to $20,000 in bodily injury coverage/person, $40,000 in bodily injury coverage/accident and $10,000 in property damage coverage/accident. These limits are set for insurance firms are businesses after all. Imagine paying a $5,000 car insurance for 5 years and not having to use it even for a single time, just think how much they earn in the proceeds of those unclaimed insurance policies. But when the crunch(accident) does happen, you�d be thankful you do have insurance. And that�s a fact.
Bodily injury liability coverage in an auto insurance policy will pay the cost of medical expenses and the loss of income for someone who is injured in an auto accident where you are found to be at fault. This coverage may also pay the cost of legal defense if you should be sued as a result of an at fault accident involving injury or death. This form of coverage protects you in case you get to injure people or your passengers in the event an accidcent happens with you on the wheel. The rising cost of medical care is no easy burden with many having to do without or not having enough coverage for such incidents.