Automobile Insurance: The Basics
What is the likelihood you will be in an automobile accident? Automobile Insurance: The Basics What is the likelihood you will be in an automobile accident? There are more than 12 million motor vehicle accidents annually The 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 years Crashes are the leading cause of death for ages 3-33
Automobile Insurance: The Basics Even a minor accident can result in thousands of dollars in damages Damage to your car Damage to other cars involved Medical Bills Lost wages Pain and suffering Prosecution Legal Fees Fines
Automobile Insurance: The Basics If you are in an accident how do you pay for it? Bank Account? Parents? Rich Uncle? Best Friend? Insurance?
Automobile Insurance: The Basics What is Automobile Insurance? 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.
Why do I need auto insurance It’s the law! There are risks you can’t afford to take 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?
Are you a risk to the insurance company? Automobile Insurance: The Basics Are you a risk to the insurance company? To keep premiums as low as possible to the insured, a screening process is completed before an insurance contract is completed
What is the insurance company looking for? Automobile Insurance: The Basics What is the insurance company looking for? Some vehicles, and some drivers, carry more risk than others Low risks will be charged a lower premium High risks will be charged a higher premium
What determines your premium? Automobile Insurance: The Basics What determines your premium? Age Gender Vehicle Type Driving Record Geographic Location
Types of Automobile Insurance Coverages Three Questions What are third-party coverages? What are first-party injury coverages? 3. What are first-party property coverages?
Types of Automobile Insurance Coverages What are third-party coverages? Bodily Injury Liability People costs (medical expenses, lost wages, pain and suffering) Property Damage Liability Things (other cars and property) Both are types of coverage required by law in most states
Types of Automobile Insurance Coverages What are first-party injury coverages? Medical Payments (MedPay) Covers medical and funeral expenses resulting from accidents with your vehicle Personal Injury Protection (PIP) Extends MedPay to include lost wages Uninsured Motorists Covers expenses if the at fault driver does not have coverage Underinsured Motorists Covers expenses when the at fault driver does not have enough coverage
Types of Automobile Insurance Coverages What are first-party property coverages? Comprehensive Compensates you for physical damage to your car, including theft, vandalism, natural disasters Collision Pays for damage to your vehicle in case of collision Both Coverages require you to pay a deductible
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
Automobile Insurance: The Policy A common mistake when shopping for automobile insurance is looking only at the price between two policies Policies differ from policy to policy and company to company
Automobile Insurance: The Policy Five parts to an insurance policy Declarations Coverages Exclusions Conditions Definitions
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?
Steps to take after an accident Help anyone who is injured You have an ethical and legal responsibility Notify the police Prevent further accidents Protect the accident scene Record information Exchange information with the parties involved Take note of time, location, weather, and road conditions
Filing a Claim 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 When you are liable for an accident The insurance company covers the loss up to the policy limits Your insurer represents you if you are sued Your insurer has the right to settle any legal action without your permission Your premium may rise Insurer has the right to cancel your policy If the losses exceed the policy provisions, the insured is responsible to cover the excess
What can you do to reduce risk and lower premiums? Automobile Insurance: The Basics What can you do to reduce risk and lower premiums? Use your seatbelt Observe Speed Limits Know your own limits Concentrate on driving Be Patient Don’t Drink and Drive Get good grades