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Automobile Insurance: The Basics

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Objectives

•Identify important types of motor vehicle insurance coverage.

•Explain factors that affect the cost of motor vehicle coverage.

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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

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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

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If you are in an accident how do you pay for it?•Bank Account?

•Parents?

•Rich Uncle?

•Best Friend?

•Insurance?

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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.

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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?

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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

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What Affects Car Insurance Prices?

• Age• Gender• Marital Status• Driving Record• Geographic Location• Driving Distance• Credit History• Vehicle Type

▫Color of vehicle does NOT affect premium▫http://www.compuquotes.com/does-color-my-

car-affect-my-auto-insurance-rate.html

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Frequently Stolen Vehicles• The nicbcars has compiled a list of the 10 vehicles most

frequently reported stolen in the U.S. in 2008.▫ 1994 Honda Accord ▫ 1995 Honda Civic ▫ 1989 Toyota Camry ▫ 1997 Ford F150 Pickup ▫ 2004 Dodge Ram Pickup▫ 2000 Dodge Caravan▫ 1996 Jeep Cherokee/Grand Cherokee▫ 1994 Acura Integra ▫ 1999 Ford Taurus▫ 2002 Ford Explorer

http://www.statefarm.com/insurance/auto_insurance/grndthft.asp

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Discounts

•Good students•Insuring more than one vehicle•Accident-free driving•Anti-theft device

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Types of Automobile Insurance Coverages

• Bodily Injury Liability▫ Covers injuries caused by a vehicle for

which you are responsible▫ People costs (medical expenses, lost

wages, pain and suffering)• Property Damage Liability

▫ Applies when you damage the property of others

• Both are types of coverage required by law in most states (including Illinois)

Illinois Motor Vehicle Insurance Coverage

•http://www.carinsurancerates.com/news/136-state-by-state-minimum-car-insurance-requirements.html

Indicates $20,000

limit will be paid to one

person in an accident

Indicates $40,000 limit that

will be paid to all

persons in an accident

Indicates $15,000 limit for

payment for damage to

the property of

others

20/40/15

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Types of Automobile Insurance Coverages

• Medical Payments▫ Coverage for medical expenses of anyone injured in your

vehicle

• Uninsured Motorists▫ Covers you and your family members expenses if the

at fault driver does not have coverage

• Underinsured Motorists▫ Covers expenses when the at fault driver does not

have enough coverage• Illinois is one of the few states that requires its motorists

to possess uninsured/underinsured motorist insurance

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Types of Automobile Insurance 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 (no matter who is at fault• Both coverages require you to pay a

deductible

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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

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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?

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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

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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

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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

Filing a Claim

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What can you do to reduce risk and lower premiums?

• Use your seatbelt• Turn 25 years old• Get married• Live in rural area• Drive safely• Drive an old beater

• Avoid sports cars

• Maintain a good credit rating

• Don’t Drink and Drive• Get good grades• Move close to work• Sorry, if male, will pay

higher premium