Auto Insurance

Automobile Insurance

Managing the Risk

*

1.16.1.G1

Family Economics & Financial Education Revised November 2004 Transportation Unit Automobile InsuranceFunded by a grant from Take Charge America, Inc. to the Department of Health and Human Development at Montana State University Bozeman

Did You Know?
There are 35 million automobile accidents annually!Insurance Information Institute http://www.iii.org/Motor vehicle crashes are the leading cause of death in the United States!Consumer Education & Economics
1.16.1.G1


What is Risk?
Risk Uncertainty about a situations outcomeUnpredictable events which can lead to loss or damage
1.16.1.G1


What is Auto Insurance?
Automobile InsuranceArrangement between an individual (consumer) and an insurer (insurance company)Protects individuals against risk from automobile accidents
1.16.1.G1


What is a Policy?
Policy - Contract between the individual and insurer specifying terms of the insurance including:Premium fee paid to the insurer to be covered under the specified termsDeductible amount paid by the policy holder for the initial portion of a loss before the insurance coverage begins
1.16.1.G1


Purpose of Auto Insurance
To help individuals limit financial loss when an auto accident occursWhen people buy auto insurance, they transfer part of the financial risk to the insurance company
1.16.1.G1


Four Types of Coverage

Liability Insurance

Medical Payment Insurance

Uninsured/Underinsured Motorists Insurance

Physical Damage Insurance
ComprehensiveCollision
1.16.1.G1


Liability Insurance
Liability InsuranceCovers injuries or damage caused to other people or their propertyTwo types of liability occur from owning and operating a vehicle:
Bodily Injury driver or car owner is held legally responsible for injuries suffered by another person

Property Damage driver or car owner is held legally responsible for damaging anothers property

1.16.1.G1


Liability Insurance continued
Policy limits for liability are usually quoted with three figures such as 25/50/10Each figure represents a multiple of $1,00025 = $25,000Per-person bodily injury limit$25,000 is the most which will be paid for any one persons bodily injury liability losses from an accident
1.16.1.G1


50 = $50,000Per-accident bodily injury limit$50,000 is the most which will be paid for all bodily injury losses from an accident10 = $10,000Per-accident property damage liability limit$10,000 is the most which will be paid in property damage liability from an accident
1.16.1.G1


Liability insurance is the minimum amount of insurance required by lawDoes not cover losses suffered by the insured or property damage to that drivers car if he or she caused the accidentMust have at least the state minimum for liability insuranceMontanas minimum liability limits:25/50/10
1.16.1.G1


Medical Payment Insurance
Medical Payment InsuranceCovers injuries sustained by the driver of the insured vehicle or any passenger regardless of faultCovers insured family members injured as passengers in a car or injured while on foot or bicyclePays for hospital and medical billsSome pay for funeral expensesNot required in all states
1.16.1.G1


Uninsured/Underinsured Motorists Insurance
Uninsured/Underinsured Covers injury or damage to the driver, passengers, or the vehicle caused by a driver with insufficient insuranceSituations where this is needed:Hit-and-run accidents (unidentified driver)Accident with an uninsured driverAccident with someone with insufficient insurance to cover the lossesNot required in all states
1.16.1.G1


Physical Damage Insurance
Physical Damage InsuranceProvides protection for damages caused to the vehicleTwo types of coverage are available:
1. Comprehensive Coverage includes all physical damage losses except collision and other specified losses. Usually includes deductible. Losses covered include:
Theft, vandalismFire, ice, windstorm, or hailGlass breakageContact with animal
1.16.1.G1


Physical Damage Insurance continued

2. Collision Coverage covers a collision with another object, car, or from a rollover
Paid regardless of faultGenerally covered when driving someone elses car with their permission
1.16.1.G1


Optional Protection
Towing CoveragePays the cost of having a vehicle towed to receive repairsRental ReimbursementProvides a rental car when the insureds vehicle is being repaired after an accident or if the vehicle was stolenMay provide only part of the funds
1.16.1.G1


Insurance Rate Influences
Insurance rates are determined for individual cases these factors influence the rates:AgePeople under age 25 pay higher premiumsGenderMen have more accidents, rates may be higherMarital statusMarried drivers have fewer accidents, so rates are lower
1.16.1.G1


Influences continued
Driving recordSafe drivers have lower rates Number and type of tickets will raise ratesNumber and severity of accidents will raise ratesType and age of vehicleNewer, more expensive, and higher repair cost vehicles have higher ratesFrequently stolen vehicles have higher ratesColor of vehicle does not matter
1.16.1.G1


Vehicle useRates are usually higher when driving more than 7,500 miles a yearThe more one drives, the greater the chance of an accidentPlace of ResidenceRates vary among statesPeople in large cities usually pay more than in rural or suburban areasWeather conditions may affect rates
1.16.1.G1


Number of drivers on the policyAdditional drivers raise the premiumCosts a driver under the age of 25 less to be added to his/her parents policy than to purchase a separate policyDriver trainingMay receive a discount for having taken a drivers education course
1.16.1.G1


Good student discountMay receive a discount for good grades in schoolMultiple car discountMay receive a discount for having two or more vehicles on the same policyAnti-theft systemsMay receive a discount for anti-theft devices such as car alarms
1.16.1.G1


Multiple policies with the same companyHaving both auto and home insuranceLong-time customersSome companies might offer discounts to long-time customers
1.16.1.G1


Save Money on Auto Insurance
Shop aroundSelect appropriate coverage and limitsAvoid expensive or high-performance vehiclesTake advantage of discounts
1.16.1.G1


Conclusion

Auto insurance protects

against the risk of accidents!

Its required by law!

Documents

Auto Insurance