1.09 Describe components of automobile insurance coverage The Purpose of Automobile Insurance Automobile coverage can serve many purposes depending on a person's needs and situations. Mainly, states require motorists to carry a policy at their required limits in order to ensure that there is compensation in place in the event that a traffic accident occurs and there are injuries and/or property damage as a result. Additionally, it can provide valuable protection to an insured's assets, liabilities, personal injuries, vehicles, and financial hardship.

Types of Automobile Coverage Liability auto insurance Pays up to the specified limits and limitations of bodily injury and property damages incurred by third parties if the insured is found liable as a result of an automobile accident. Without coverage, the liable party would be responsible for paying the third parties' damages and may be forced to pay from the equity of a house or vehicle. Having this type of protection helps in the event of unforeseen accidents and the associated costs

Types of Automobile Coverage No Fault Insurance Coverage, also known as Personal Injury Protection or PIP, is coverage which applies to a driver, passengers and any pedestrians involved in an automobile accident. It pays up to the policy limits for medical expenses, loss of wages, and other related injuries regardless of who is at fault and even if there is negligence involved

Types of Automobile Coverage Medical payments auto insurance Portion of a policy is designed to pay some of the medical consequences that may result from an accident such as medical bills and/or funeral expenses up to the policy limit.

Types of Automobile Coverage Uninsured motorist auto insurance Not only insures against the "Uninsured motorist" but also protects policy owners against the "Under-insured motorist". Uninsured motorist is optional; However, it is recommended that it be added to a policy in the best interest of the insured

Types of Automobile Coverage Comprehensive and collision auto insurance coverageComprehensive and collision auto insurance coverage, Also referred to as "Physical Damage", covers damage caused by anything "other than auto collisions" (sometimes abbreviated as "OTC"). It is important to note that there are exclusions under comprehensive coverage and some of the more common ones are,theft, fire, vandalism, collision with animal, windstorm, flying objects, hail, broken windows.

Types of Automobile Coverage Rental car coverage Pays for the rental of a vehicle in the event the policy owner's vehicle be stolen or in an accident. If available through your insurance company, it may provide reimbursement for costs paid towards a rental car while the vehicle is being repaired or if stolen, while the claim is settled.

Types of Automobile Coverage Roadside assistance Plans can vary depending on the company providing it. Typical coverage consists of 24 hour emergency towing service, 24 hour lost key and lockout service, 24 hour mechanical first aide, 24 hour emergency road service, 24 hour battery service, 24 hour tire service, theft and hit & run protection, rental car discounts, map routing service and theme park discounts.

What Determines the Price of My Auto Insurance Policy Your driving record. The better your record, the lower your premium. If you have had accidents or serious traffic violations, it is likely you will pay more than if you have a clean driving record. You may also pay more if you are a new driver and have not been insured for a number of years. How much you use your car. The more miles you drive, the more chance for accidents. If you drive your car for work, or drive it a long distance to work, you will pay more. If you drive only occasionally—what some companies call “pleasure use”, you will pay less.

What Determines the Price of My Auto Insurance Policy Where your car is parked and where you live. Where you live and where the car is parked can affect the cost of your insurance. Generally, due to higher rates of vandalism, theft and accidents, urban drivers pay a higher auto insurance price than those in small towns or rural areas. Your age In general, mature drivers have fewer accidents than less experienced drivers, particularly teenagers. So insurers generally charge more if teenagers or young people below age 25 drive your car.

What Determines the Price of My Auto Insurance Policy Your gender As a group, women tend to get into fewer accidents, have fewer driver-under-the- influence accidents (DUIs) and most importantly less serious accidents than men. So, all other things being equal, women generally pay less for auto insurance than men. Of course, over time individual driving history for both men and women will have a greater impact on what they pay for auto insurance. The car you drive. Some cars cost more to insure than others. Variables include the likelihood of theft, the cost of the car itself is major rate factor, the cost of repairs, and the overall safety record of the car. Engine sizes, even among the same makes and models, can also impact insurance premiums. Cars with high quality safety equipment might qualify for premium discounts. Insurers not only look at how safe the car is to drive and how well it protects occupants, they also look at the potential damage a car can inflict on another car. If a specific car has a higher chance of inflicting damage on another car and its occupants, some insurers may charge more for liability insurance.

What Determines the Price of My Auto Insurance Policy Your credit For many insurers, credit-based insurance scoring is one of the most important and statistically valid tools to predict the likelihood of a person filing a claim and the likely cost of that claim. Credit-based insurance scores are based on information like payment history, bankruptcies, collections, outstanding debt and length of credit history. For example, regular, on-time credit card and mortgage payments affect a score positively, while late payments affect a score negatively.

What Determines the Price of My Auto Insurance Policy The type and amount of coverage. In virtually every state, by law you must buy a minimum amount of liability insurance. The state required limits are generally very low and most people should consider purchasing much more than the state requirement—the recommended amount of liability protection is about ten times the average state minimum. If you have a new or recent model of car, you likely will also buy comprehensive and collision coverage, which pays for damage to your car due to weather, theft or physical damage to the car such as being hit by a tree. Comprehensive and collision coverages are subject to deductibles; the higher the deductible, the lower your auto insurance premium. While there is no legal requirement to purchase these coverages, if you finance the purchase of the car or you lease it you may be required by contract.

Discuss the purpose of gap auto insurance Basically, gap auto insurance covers the "gap" between what you currently owe on your auto loan and the current fair market value of your vehicle. Comprehensive and collision policies only cover your car’s fair market value, which can be as little as 80% of what you originally paid for your car. In the event that you’re involved in an accident and your car is “totaled,” or stolen, and was not recovered, you could owe the company that financed the vehicle up to 20% over and above the amount your auto insurance company paid you for the vehicle. From an auto insurance standpoint, if your car is stolen and not recovered by the authorities, your insurer views the loss in the same manner as an at- fault accident on your part; meaning that comprehensive insurance covers the value of the vehicle, but not necessarily the amount you owe to the financing entity. As a result, you could be stuck paying thousands of dollars for a car you can’t even drive!

Discuss the purpose of gap auto insurance A Gap Insurance Example If your loan amount is $24,000 on a new vehicle and immediately after signing the loan papers you total the car, then your car insurance will likely only give you the Blue Book quote amount. You would receive a check for around $21,000, but you still owe an excess of $3,000 on the loan. This gap in coverage is covered by the gap auto insurance policy. Purchasing Gap Insurance This type of coverage is a must have for any new car purchase, as the car’s value drops significantly as soon as it is driven off the car lot. Gap insurance is not required when you buy a new car, but in the case of an accident, this type of coverage can protect your investment. Many states now require that all companies who sell auto insurance also offer gap coverage as well. If your current company does not offer gap insurance, you can often purchase it from a company as an independent policy.

Performance Activity You are participating in a school-wide service project to educate teens about the importance of auto insurance. You should develop and distribute instructional materials that explain the purpose of auto insurance, types of coverage typically included, factors influencing the auto insurance needed, and factors that impact the pricing of auto insurance policies