Why do we need car insurance? Video Warmup Why do we need car insurance? Video

5-4 AUTOMOBILE INSURANCE Banking 7/16/2018 5-4 AUTOMOBILE INSURANCE OBJECTIVES Learn about different types of auto insurance coverage. Compute insurance costs. Compute payments on insurance claims. Chapter 1

Key Terms Premium Claim bodily injury liability (BI) property damage liability (PI) uninsured/underinsured motorist protection (UMP) no-fault insurance comprehensive insurance collision insurance car-rental insurance deductible

Example 1 Kwan’s annual premium is $1,284. If he pays quarterly, there is a $1 per payment surcharge (extra fee). What is the quarterly payment? Leon’s annual premium is $1,520. If he pays monthly, there is a $2 per payment surcharge. What is the monthly payment? Example 2

Example 3 Stan DeMille has $25,000 worth of property damage liability insurance. He caused an accident that damaged a $2,000 fire hydrant and did $5,600 worth of damage to another car. How much of the damage must Stan pay? Keith has $50,000 worth of uninsured motorist liability insurance. He caused an accident that injured two passengers in his car. Their combined medical bills were $70,000. How much must Keith pay? Example 4

EXAMPLE 5 Peter has $1,000 deductible collision insurance. Peter backs his car into his garage and causes $4,300 worth of damage to the car. How much will his insurance company have to pay? Manuel has $500 deductible comprehensive insurance. His car is stolen and never recovered. If the book value is $4,200, how much will his insurance company have to pay? EXAMPLE 6

Bodily injury liability insurance is usually shown by 2 numbers (for example 50/100). The first number is the maximum for one person and the second is the maximum for all injuries. EXAMPLE 7 Bob was in an auto accident caused by his negligence. He has 100/300 bodily injury insurance. The three people injured in the accident sued. One person was awarded $140,000, and each of the other two was awarded $75,000. How much does the insurance company pay?

EXAMPLE 8 Joan has 50/100 BI liability insurance. She hurts 28 children riding a school bus, and each child is awarded $10,000 as a result of a lawsuit. How much will the insurance company pay in total for this lawsuit?

PIP (no-fault insurance) pays up to the limit for each person hurt in the vehicle, no matter who is responsible. EXAMPLE 9 Desmond has a policy with 50/150 BI, $50,000 PD, and $50,000 PIP. He causes an accident in which he hurts 7 people in a minivan and 4 people in his own car, including himself. The eleven people who are hurt have minor injuries and do not sue Desmond. The total medical bill for all involved is $53,233. How much does the insurance company pay?

EXAMPLE 10 Pat has 50/100 BI liability insurance and $100,000 PIP insurance. She hurts 28 children in a school bus and is not sued. However, if each child needs $10,000 for medical care, how much will the insurance company pay in total for these medical claims?