1. Activity Risky Business

2. Automobile Insurance

3. Today’s Learning Objective How does auto insurance work? Automobile Liability No-Fault Collision Other-than-Collision (Comprehensive) Uninsured/Underinsured Motorist Other coverages

4. Automobile Insurance Policy can be made up of many parts Some required Some optional The more coverage you want, the higher your premium

5. Automobile Liability Coverage required by all states covers damages to other people and their property caused by you driving your vehicle (i.e. accident is your fault) It will have 3 coverage limits: –for bodily injury per other injured party –for bodily injury per accident, regardless of the number of other injured parties and –property damage

6. Liability Insurance Example $100,000 per person $300,000 per accident $50,000 property damage $100,000 per-person coverage for bodily injury to each injured party –if you cause bodily injury to someone that totals $200,000, your insurance only pays $100,000

7. $300,000 per-accident bodily injury, regardless of the number of injured parties –if you cause bodily injury to 5 people that totals $450,000 in medical bills, your insurance will only pay $300,000 $50,000 for property damage per accident –this is what pays for the damage you cause to someone else’s car »if you crash into and total a $80,000 vehicle, your insurance would only pay $50,000

8. You are personally liable for any damages above the maximum amounts of your coverage –that means you pay the rest YOU must ensure you have adequate coverage –minimums required by your state –enough to cover any damage you might cause in your local area

9. No-Fault Insurance Some states have this instead of requiring liability coverage for bodily injury Should you get in an accident, your insurance pays for any bodily injury to you, regardless of who is at fault in the accident Believed to result in lower insurance premiums, since insurance company only has to worry about you –You set coverage amounts At-fault individual is still responsible for paying for property damage (vehicle, etc.)

10. Collision Coverage Pays for direct or accidental damage to your car due to: –colliding with another object (car, tree, etc.) –upset, such as overturn only pays out if accident is your fault most common type of damage caused to your car –most expensive portion of your policy

11. not required if you own your vehicle required if you have a loan on or lease your vehicle You will set your deductible for this coverage Your insurance company will pay the remaining amount to either repair the vehicle or pay “fair market value” (whichever is less) Insurance company will base this portion of your premium off of fair market value of vehicle

12. Other than Collision (previously called Comprehensive) Coverage Pays for all damage to your car by anything else other than collision –storm –theft –vandalism You set the deductible for this coverage –Insurance company will base this portion of your premium off of fair market value of vehicle

13. “Totaling” Your Vehicle Does not mean vehicle is beyond repair Simply means it will cost more to repair your vehicle than insurance company is willing to pay to return your car to its condition prior to the accident –Based on vehicle’s fair market value

14. “Total” normally not 100% of current fair market value –Insurance company sets % of fair market value it believes is the maximum for which it is worth it to repair vehicle (60%, 75%, etc.) –Repair amounts beyond this percentage, once the loss in value of the vehicle due to having such extensive damage is accounted for, are greater than the post- repair value of the vehicle

15. Insurance company will still pay out 100% of fair market value –Vehicle will get a “salvage title” & be shipped off to junkyard by them –If you want to still keep vehicle & repair it, insurance company will pay you fair market value minus salvage value (usually 10 – 25% of fair market value) –You can still get vehicle fixed with money insurance company gives you, but you may have trouble selling vehicle in future with a “salvage title”

16. Uninsured/Underinsured Motorist Covers you in case you are hit by someone who either: –Has no insurance –Does not have enough coverage Required in most states Get enough to pay for you and your vehicle You will have a deductible (you set)

17. Other Coverage Medical expenses –pays certain medical or funeral expenses for anyone in your car, regardless of fault –Optional Income loss coverage –if you cannot work due to injuries from an automobile accident that is your fault, it pays for your lost income at a rate specified in your policy

18. Towing coverage –covers towing expenses for your car should it break down Rental coverage –pays for a rental car for you should your car become disabled due to an event covered by your collision or other-than- collision coverage

19. Risk Management for Auto Insurance Risk Reduction –Be a good driver/maintain good driving record –Drive a vehicle with better risk category Risk Transfer –Obtain insurance for risks you wish to transfer: Liability & uninsured/underinsured motorist (required) Collision Comprehensive Medical, towing, rental, etc. Risk Retention –Deductibles –Coverage limits –Risks you choose not to transfer

20. Insurance Institute for Highway Safety (IIHS) Highway Loss Data Institute (HLDI)

21. Assignment Auto Insurance