Insurance Basics Insurance is a way of planning for the unknown Why do we need auto insurance? Accidents can be VERY expensive
Insurance Basics When you buy insurance you receive an insurance policy Insurance policy: is a legal contract between a person buying insurance (policyholder) and an insurance company
Insurance Basics An insurance policy explains: Who is covered Types of losses for which the company will pay Amounts the company will pay The cost of the insurance
Insurance Basics Insurance Premium: is the payment you make to an insurance company in exchange for its promise of protection and help In return for the premium, the insurance company protects you against large losses
Insurance Basics When you buy most types of insurance coverage, you agree to pay a deductible Deductible: is the amount of the loss you must pay out of your own pocket before the insurance company begins to reimburse you
Insurance Basics Deductibles can be as low as $100 and run up to $1,000 or more The higher the deductible is, the lower your premium
Insurance Basics Example of a deductible: Assume you choose a $250 deductible for your car. Any losses that are less than $250 you have to pay. Any claims in excess of $250 would be paid by the insurance company If you had a $400 repair bill from a minor accident, you would pay $250 and the insurance company would pay $150
Insurance Basics How does the insurance company know to pay you for a loss? You file a claim: an oral or written notice to the insurance company
Types of Coverage Bodily Injury Liability Property Damage Liability Collision Comprehensive Uninsured/Underinsured Motorist Medical Payments Coverage
Bodily Injury/Property Damage Liability Required in Colorado The minimum is 25/50/15 This means $25,000 covered for one person per accident $50,000 for all persons per accident $15,000 for property damage per accident (Property damage liability)
Bodily Injury/Property Damage Liability Covers injuries and damages YOU are responsible for. Covers injuries suffered by everyone in the other car(s). DOES NOT cover injuries on yourself. Also covers property damage to the other car And covers legal bills in case you are sued
Medical Payments Coverage While Liability covers OTHER people, medical payments coverage protects YOU, and your passengers.
Collision Pays to repair only your car if it is damaged Includes collision with another car, a tree, a pole, etc. Collision coverage requires a deductible It is the most expensive coverage
Collision As your car gets older and the value decreases, you might consider dropping collision coverage Collision coverage pays only the estimated value of your car
Collision Coverage Example: Your car is worth $1,000. You have a $500 deductible. Collision coverage costs $100/yr. If you get into an accident, you would get a check for a maximum of $500 from the insurance company. ($1000 for your car - $500 deductible) Is this a good benefit for the cost?
Uninsured/Underinsured Motorist Required in Colorado The minimum is 25/50 Uninsured protects you against drivers who do not have liability insurance. Underinsured protects you in case another motorist doesnt have enough coverage.
Comprehensive Covers your car for reasons other than collision. Examples: Hail, flood, theft, vandalism, etc… Usually requires a deductible If you bought a $40,000 car 5 years ago, and it is stolen today, the insurance company will pay the actual cash value: how much the property is worth at the time of the accident. A car is stolen every 28 seconds in the U.S.