Automobile Insurance Managing the Risk

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Did You Know?  There are 35 million automobile accidents annually! Insurance Information Institute  Motor vehicle crashes are the leading cause of death in the United States! Consumer Education & Economics

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona What is Risk?  Risk – Uncertainty about a situation’s outcome Unpredictable events which can lead to loss or damage

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona What is automobile Insurance?  Automobile Insurance Policy Contract between an individual (consumer) and an insurer (insurance company) Protects individuals against risk from automobile accidents

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Purpose of Automobile Insurance  To help individuals limit financial loss when an automobile accident occurs  When people buy automobile insurance, they transfer part of the financial risk to the insurance company

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona What is a Policy?  Policy - Contract between the individual and insurer specifying terms of the insurance including: Premium – fee paid to the insurance company to be covered under the specified terms Deductible – amount paid by the policy holder (consumer) for the initial portion of a loss before the insurance coverage begins

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Four Types of Coverage 1. Liability Insurance 2. Person Injury Protection 3. Uninsured/Underinsured Motorists Insurance 4. Physical Damage Insurance Comprehensive Collision

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Liability Insurance  Liability Insurance Covers injuries or damage caused to other people or their property  Two types of liability occur from owning and operating a vehicle: 1. Bodily Injury – driver or car owner is held legally responsible for injuries suffered by another person 2. Property Damage – driver or car owner is held legally responsible for damaging another’s property when it is your fault

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Liability Insurance continued  Liability insurance is the minimum amount of insurance required by law in all states  Does not cover losses suffered by the insured or property damage to that driver’s car if he or she caused the accident  Must have at least the state minimum for liability insurance

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Liability Insurance continued  Policy limits for liability are usually quoted with three figures such as 30/60/10 Each figure represents a multiple of $1,000  30 = $30,000 Per-person bodily injury limit $30,000 is the most which will be paid for any one person’s bodily injury liability losses from an accident

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Liability Insurance continued  60 = $60,000 Per-accident bodily injury limit $60,000 is the most which will be paid for all bodily injury losses from an accident  10 = $10,000 Per-accident property damage liability limit $10,000 is the most which will be paid in property damage liability from an accident to the driver not at fault

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Personal Injury Protection  Medical Payment Insurance Covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault Covers insured family members injured as passengers in a car.  Pays for hospital and medical bills  Lost wages, and replacement services Some pay for funeral expenses

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona PIP Insurance Continued  Required 40/20/20 $40,000/person/accident $20,000 for hospital/medical expenses $20,000 for non-medical expenses

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Uninsured/Underinsured Motorists Insurance  Uninsured/Underinsured Covers injury or damage to the driver, passengers, or the vehicle caused by a driver with insufficient insurance  Situations where this is needed: Used after your PIP benefits are used up Hit-and-run accidents (unidentified driver) Accident with an uninsured driver Accident with someone with insufficient insurance to cover the losses  25/50 Required for both uninsured and underinsured $25,000 for injuries to one person $50,000 for injuries to two or more people

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Physical Damage Insurance  Physical Damage Insurance Provides protection for damages caused to the vehicle  Two types of coverage are available: 1. Comprehensive Coverage – includes all physical damage losses except collision and other specified losses. Usually includes deductible. Losses covered include:  Theft, vandalism  Fire, ice, windstorm, or hail  Glass breakage  Contact with animal

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Physical Damage Insurance continued 2. Collision Coverage – covers a collision with another object, car, or from a rollover  Paid regardless of fault  Generally covered when driving someone else’s car with their permission

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Common Questions  Renting a car MN law requires every policy to have a min. of $35,000 in property damage liability  Coverage when you loan car to a friend If they have a policy it will pay for their injuries, if they don’t have a policy and are a legal driver it will be covered under yours Damage to car is paid under yours if you have comprehensive and collision.

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Insurance Rate Influences  Insurance rates are determined for each individual:  Age People under age 25 pay higher premiums  Gender Men have more accidents, rates may be higher  Marital status Married drivers have fewer accidents, so rates are lower

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Influences continued  Driving record Safe drivers have lower rates Number and type of tickets will increase rates Number and severity of accidents will increase rates  Type and age of vehicle Newer, more expensive, and higher repair cost vehicles have higher rates Frequently stolen vehicles have higher rates Color of vehicle does not matter

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Influences continued  Vehicle use Rates are usually higher when driving more than 7,500 miles a year The more one drives, the greater the chance of an accident  Place of Residence Rates vary among states  People in large cities usually pay more than in rural or suburban areas Weather conditions may affect rates

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Influences continued  Number of drivers on the policy Additional drivers raise the premium It costs a driver under the age of 25 less to be added to his/her parents’ policy than to purchase a separate policy  Driver training May receive a discount for having taken a driver’s education course

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Influences continued  Good student discount May receive a discount for good grades in school  Multiple car discount May receive a discount for having two or more vehicles on the same policy  Anti-theft systems May receive a discount for anti-theft devices such as car alarms

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Influences continued  Multiple policies with the same company Having both automobile and home insurance  Long-time customers Some companies might offer discounts to long- time customers

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Save Money on automobile Insurance  Shop around  Select appropriate coverage and limits  Avoid expensive or high-performance vehicles  Take advantage of discounts

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 25 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona How to File a Claim  Write down names of any drivers involved Their insurance companies Policy numbers License plates  Write down name, address, phone number of independent witness  Call your agent  Call the other driver’s insurance agent if you want to file a claim against the other driver’s policy

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 26 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Obtaining Repair Estimates  You may choose your own repair shop May have to get more than one estimate If your shop is not the lowest bidder you may be responsible for the difference  Insurance Company has right to inspect vehicle after work is done

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 27 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Nonrenewal  A number of points accumulated can be cause for nonrenewal Points are based on violations or accidents 2 points acquired by one insured on a single vehicle is sufficient for nonrenewal  4 points—Hit and run, felony of a motor vehicle, theft of a motor vehicle, any violation that results in suspension or revocation of license  2 ½ points—reckless driving  1 ½ points—Careless riving  1 point—Chargeable accident in which insurer pays more than $500, open bottle

G1 © Family Economics & Financial Education – Revised February 2009– Transportation Unit – Automobile Insurance – Slide 28 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Nonrenewal Continued  1 ½ points—Careless sriving  1 point—Chargeable accident in which insurer pays more than $500, open bottle  ¾ point—2 nd and each subsequent speeding violation during 3 previous years  ½ point—1 st speeding violation, accident under $500 charged to insurer, allowing open bottle, all other moving violations  