1. RISK, RESPONSIBILITY, REALITY REALITY How Insurance Works

2. 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 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 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 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 Crashes are the leading cause of death for ages 3- 33

3. Automobile Insurance: The Basics 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. Automobile Insurance: The Basics ASSIGNED RISK - If you are dropped by an insurance company because of a poor driving record, you may end up in your state’s Automobile Insurance Plan ASSIGNED RISK - If you are dropped by an insurance company because of a poor driving record, you may end up in your state’s Automobile Insurance Plan RATING TERRITORY - The community in which a person lives affects the price of premiums RATING TERRITORY - The community in which a person lives affects the price of premiums “Rural” usually lowers rates, “urban” usually raises rates driving record “Rural” usually lowers rates, “urban” usually raises rates driving record

5. Automobile Insurance: The Basics If you are in an accident how do you pay for it? Bank Account? Parents or Guardian? Family Member? Best Friend? Insurance?

6. Why Do I Need Auto Insurance? 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 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.

8. Automobile Insurance: The Basics What determines your premium? AgeGender Vehicle TypeDriving Record Geographic LocationMartial Status Miles DrivenCredit Score

9. The Basics is the chance that something unexpected will occur. RISK is the chance that something unexpected will occur. Four approaches to managing risk. 1.Risk Avoidance 2.Risk Control/Reducing 3.Risk Transfer/Sharing (Insurance) 4.No insurance

10. 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 Ex. Auto Insurance Application Form Ex. Auto Insurance Application Form

11. 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  premiumLow risks will be charged a  premium High risks will be charged a  premiumHigh risks will be charged a  premium

12. Automobile Insurance: The Basics What can you do to reduce risk and lower premiums? Use your seatbeltUse your seatbelt Observe Speed LimitsObserve Speed Limits Know your own limitsKnow your own limits Concentrate on drivingConcentrate on driving Be PatientBe Patient Don’t Drink and DriveDon’t Drink and Drive Get good gradesGet good grades Higher DeductibleHigher Deductible Shop AroundShop Around

13. The Virginia Automobile Insurance Policy All policies provide LIABILITY Person may be held legally responsible for any damages as a result of an accident which you are at fault. LIABILITY Person may be held legally responsible for any damages as a result of an accident which you are at fault. NEGLIGENT – Person at fault for an accident could be sued NEGLIGENT – Person at fault for an accident could be sued UM-UNINSURED/UNDERINSURED MOTORIST– if you are damaged by someone who does not have coverage (or not enough coverage) UM-UNINSURED/UNDERINSURED MOTORIST– if you are damaged by someone who does not have coverage (or not enough coverage)

14. UM Motorists ■ Coverage reimburses you for bodily injury in accidents caused by the following: Hit and Run Drivers Motorist w/ no insurance Motorist underinsured

15. Split Limit Basis Uninsured and Underinsured Motorist Limits Ex.: 100/ 300/ 50 100,000 Bodily Injury per person 300,000 Bodily Injury all persons 50,000 Total Property Damage Higher Limits can be purchased if desired.

16. Bodily Injury Insurance 1. Bodily Injury Liability - If you injure someone in the accident (outside of your vehicle) Pays claims of injury or death up to coverage amount 2. Medical Payments Coverage Insurance pays the medical expenses and cost of health care for the driver and passengers injured in the insured’s vehicle (inside your vehicle)

17. Bodily Injury Insurance Pays claims of injury or death up to coverage amount SINGLE-LIMIT BASIS - One amount the insurance company will pay for any one accident. SPLIT-LIMIT BASIS - Separate limits are set for different categories.

18. Optional Coverage: Property Damage Liability 1.PROPERTY DAMAGE COVERAGE - damage to another person’s car or property (lamppost, fence, shed) 2.COLLISION COLLISION 3.COMPREHENSIVE COMPREHENSIVE 4.MEDICAL EXPENSE (pays medical and funeral expenses for the driver and passengers) 5.RENTAL REIMBURSEMENT c 5.RENTAL REIMBURSEMENT coverage pays a specific amount per day to rent a car while yours is being fixed 6.Emergency Road Service covers cost of emergency repairs such as jump start batteries or towing services

19. Collision Definition: Coverage pays for the physical damage to your car as a result of an accident o Collide with any object o Turn your car over o Hit by uninsured motorist o Limited by deductible

20. Comprehension Physical Damage Comprehension Physical Damage Definition: Coverage pays for damage caused by vandalism, hailstorms, floods, theft, etc. (other than collision) Actual Cash Value - Market value the property is worth the moment before the accident Financial institutions that provide auto loans require the insured to purchased collision and comprehensive insurance. Collision and comprehensive insurances not required/suggested when the cost of the premium exceeds the value of the automobile.

21. No-Fault Insurance NO-FAULT INSURANCE NO-FAULT INSURANCE -Your insurance company pays for bodily injuries to you and your passengers no matter who caused the accident. o Virginia is not a no-fault state. Live in No-Fault State: o WAGE-LOSS o WAGE-LOSS -Reimburses the insured for income lost because of an auto injury o SUBSTITUTE-SERVICE o SUBSTITUTE-SERVICE -Pays for services that you cannot perform for yourself because of an auto- related injury. Ex. Cook, Sitter

22. What is a Deductible? DEDUCTIBLE - 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  the deductible you pay; the premiums  What is a Deductible?