1 Automobile Insurance: The Basics

Objectives Identify important types of motor vehicle insurance coverage. Explain factors that affect the cost of motor vehicle coverage. 2

What is the likelihood you will be in an automobile accident? There are more than 12 million motor vehicle accidents annuallyThere are more than 12 million motor vehicle accidents annually The typical driver will have a near automobile accident one or two times per monthThe typical driver will have a near automobile accident one or two times per month The typical driver will be in a collision of some type on average of every 6 yearsThe typical driver will be in a collision of some type on average of every 6 years Crashes are the leading cause of death for ages 3-33Crashes are the leading cause of death for ages

Even a minor accident can result in thousands of dollars in damages Damage to your carDamage to your car Damage to other cars involvedDamage to other cars involved Medical BillsMedical Bills Lost wagesLost wages Pain and sufferingPain and suffering ProsecutionProsecution Legal FeesLegal Fees FinesFines 4

If you are in an accident how do you pay for it? Bank Account?Bank Account? Parents?Parents? Rich Uncle?Rich Uncle? Best Friend?Best Friend? Insurance?Insurance? 5

What is Automobile Insurance? An auto insurance policy is a contract between you and an insurance company.An auto insurance policy is a contract between you and an insurance company. You pay a premium, and in exchange, the insurance company promises to pay for specific car-related financial losses during the term of the policy.You pay a premium, and in exchange, the insurance company promises to pay for specific car-related financial losses during the term of the policy. 6

Why do I need auto insurance It’s the law!It’s the law! There are risks you can’t afford to takeThere are risks you can’t afford to take What happens if… What happens if… –You’re involved in a crash that causes property damage? –You hurt yourself or someone else? –Your car is damaged when you’re not driving it? (by weather, vandalism or a hit-and-run) –Your car is stolen? –Your car breaks down and needs to be towed? 7

What is the insurance company looking for? Some vehicles, and some drivers, carry more risk than othersSome vehicles, and some drivers, carry more risk than others Low risks will be charged a lower premiumLow risks will be charged a lower premium High risks will be charged a higher premiumHigh risks will be charged a higher premium 8

What Affects Car Insurance Prices? AgeAge GenderGender Marital StatusMarital Status Driving RecordDriving Record Geographic LocationGeographic Location Driving DistanceDriving Distance Credit HistoryCredit History Vehicle TypeVehicle Type ▫Color of vehicle does NOT affect premium ▫ affect-my-auto-insurance-rate.html 9

Frequently Stolen Vehicles The nicbcars has compiled a list of the 10 vehicles most frequently reported stolen in the U.S. in ▫1994 Honda Accord ▫1995 Honda Civic ▫1989 Toyota Camry ▫1997 Ford F150 Pickup ▫2004 Dodge Ram Pickup ▫2000 Dodge Caravan ▫1996 Jeep Cherokee/Grand Cherokee ▫1994 Acura Integra ▫1999 Ford Taurus ▫2002 Ford Explorer 10

Discounts Good students Insuring more than one vehicle Accident-free driving Anti-theft device 11

Types of Automobile Insurance Coverages Bodily Injury LiabilityBodily Injury Liability ▫Covers injuries caused by a vehicle for which you are responsible ▫People costs (medical expenses, lost wages, pain and suffering) Property Damage LiabilityProperty Damage Liability ▫Applies when you damage the property of others Both are types of coverage required by law in most states (including Illinois)Both are types of coverage required by law in most states (including Illinois) 12

Illinois Motor Vehicle Insurance Coverage state-by-state-minimum-car- insurance-requirements.html Indicates $20,000 limit will be paid to one person in an accident Indicates $40,000 limit that will be paid to all persons in an accident Indicates $15,000 limit for payment for damage to the property of others 20/40/15

Types of Automobile Insurance Coverages Medical PaymentsMedical Payments ▫Coverage for medical expenses of anyone injured in your vehicle Uninsured MotoristsUninsured Motorists ▫Covers you and your family members expenses if the at fault driver does not have coverage Underinsured MotoristsUnderinsured Motorists ▫Covers expenses when the at fault driver does not have enough coverage Illinois is one of the few states that requires its motorists to possess uninsured/underinsured motorist insuranceIllinois is one of the few states that requires its motorists to possess uninsured/underinsured motorist insurance 14

Types of Automobile Insurance Coverages ComprehensiveComprehensive Compensates you for physical damage to your car, including theft, vandalism, natural disasters Compensates you for physical damage to your car, including theft, vandalism, natural disasters CollisionCollision ▫Pays for damage to your vehicle in case of collision (no matter who is at fault Both coverages require you to pay a deductible Both coverages require you to pay a deductible 15

16 What is a Deductible? This is the amount per accident that you pay out of pocket before insurance starts to pay Common deductible amounts are usually $250, $500, and $1000 The higher the deductible amount you pay the lower your premiums are

17 Automobile Insurance: Accidents Chances are even if you are never in an accident you will witness one What should you do if you are involved in an accident?

18 Steps to take after an accident Help anyone who is injuredHelp anyone who is injured You have an ethical and legal responsibilityYou have an ethical and legal responsibility Notify the policeNotify the police Prevent further accidentsPrevent further accidents Protect the accident sceneProtect the accident scene Record informationRecord information Exchange information with the parties involvedExchange information with the parties involved Take note of time, location, weather, and road conditionsTake note of time, location, weather, and road conditions

19 It is important that the accident is reported promptly to the insurance agent or company The policy will guide the insured on the correct steps to take to report the claim The company will guide the insured through the process Filing a Claim

20 When you are liable for an accident The insurance company covers the loss up to the policy limitsThe insurance company covers the loss up to the policy limits Your insurer represents you if you are suedYour insurer represents you if you are sued Your insurer has the right to settle any legal action without your permissionYour insurer has the right to settle any legal action without your permission Your premium may riseYour premium may rise Insurer has the right to cancel your policyInsurer has the right to cancel your policy If the losses exceed the policy provisions, the insured is responsible to cover the excessIf the losses exceed the policy provisions, the insured is responsible to cover the excess Filing a Claim

21 What can you do to reduce risk and lower premiums? Use your seatbeltUse your seatbelt Turn 25 years oldTurn 25 years old Get marriedGet married Live in rural areaLive in rural area Drive safelyDrive safely Drive an old beaterDrive an old beater Avoid sports carsAvoid sports cars Maintain a good credit ratingMaintain a good credit rating Don’t Drink and DriveDon’t Drink and Drive Get good gradesGet good grades Move close to workMove close to work Sorry, if male, will pay higher premiumSorry, if male, will pay higher premium