Insurance, the most confusing of all units we do. Pay attention.

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Transcript Insurance, the most confusing of all units we do. Pay attention.

Why insurance?
• I want you to be an informed consumer of
a product we all have to have.
• Each of us has multiple types of policies
and coverage’s.
• You can be insurance poor.
Insurance, the most confusing of all
units we do. Pay attention.
• Any form of insurance is that, you pay a
relatively small amount, so no one gets
caught with a large financial loss
• i.e. a $500/year homeowners policy will
pay for a $100,000 house or a $500,000
All Insurance
• All forms of insurance are the same concept.
You attempt to protect against a large financial
loss. Homeowners, life, health, renters, flood,
disability, dental are just some of the forms of
insurance other than car insurance.
• All insurance companies are in business to
make money for their stock holders, read the
fine print.
Car insurance in NC
• In North Carolina, as most other states, a
owner/driver is required to prove financial
responsibility in order to legally operate a
motor vehicle.
• A driver must be responsible for any
damage he/she does to someone else or
their property.
Financial Responsibility
• There are actually two ways to prove
financial responsibility, post a cash bond
(in effect, self insuring you and/or your
company) or buy liability insurance.
• Personal Injury Liability insurance protects the
owner/driver against having to pay for injuries they have
caused to others.
• Insurance companies will pay up to the limit (amount
purchased) of the policy. The minimum amount allowed
by law in NC is $60,000 per accident (All persons
injured) and $30,000 per person (any one person).
• This is not enough coverage to adequately protect you if
you seriously hurt someone. 100/300 or 300/300 might
be a better choice even if it costs a little more in
• Typical ICU costs about $10,000/day.
• Property Damage Liability insurance pays
for damage you do to another person's
property (car, house, yard, mailbox, etc.).
Your company will pay, up to the limit of
the policy, to fix other's property.
• NC requires a minimum of $25,000 PDL.
For about $10 more per year, you can buy
$100,000 coverage. If you hit a new
vehicle, you will need more than $25,000.
Why buy more?
• All the costs above the insurance, are your
responsibility. You will be required to pay
whatever your insurance company does
not for an “at Fault” accident.
• That includes garnishing your future
• Increasing your coverage’s is cheap in the
big picture.
DL 123 Form
• DMV requires proof of both types of liability
insurance to get a license plate or a driver's
• A DL 123 form is filled out by an insurance agent
as proof of liability coverage’s. PI and PD
• A lapse in coverage is a $50 penalty per vehicle.
It might cost you the plate for however long DMV
• Insurance companies are required to notify DMV
if you no longer have insurance, for whatever
Collision coverage
• Collision insurance protects your car when you are at fault in a
collision. Your company will pay up to the "book" value of your car in
the event you damage it,
minus the deductible.
• Deductibles are the portion you pay first before the insurance
company pays. Collision deductibles are usually $250-$1000. The
higher the deductible, the lower the premium.
• Collision claims will raise your future premiums for three years
because you are at fault.
• Collision is required by the bank if you lease or borrow money
against your vehicle.
• FYI, Collision will pay for your vehicle’s damage if the other driver, at
fault, does not. For whatever reason, with no increase in premium.
Comprehensive Coverage
• Comprehensive insurance pays to repair your vehicle
from "acts of God," or theft, vandalism, flood, even a
deer damaging your car. Any damage that you are not
responsible for.
• Again your company will pay up to the book value.
Comprehensive claims should not increase your rates
because they are not your fault.
• Comprehensive is also required for a loan or lease.
• Don’t hit two deer, you will be dropped from this
coverage as too high a risk.
Medical Payments
• Medical payments insurance pays for you or
your passengers medical bills, regardless
of fault, up to the limit of the policy. $10,000 is
currently the maximum amount available in NC.
• This will pay for minor injuries, ambulance, ER
visits, and deductibles on major medical policies.
It is not intended to cover all medical bills.
• You are not required to have medical payments
coverage. If you have major medical, you may
not need this coverage too.
Uninsured Motorist
• Uninsured motorist coverage protects the
owner/driver against another driver, at
fault, not having any insurance.
• Your company will pay your medical and vehicle
repair bills if the other driver does not have
insurance (up to the limit of your policy).
• You are now required to have uninsured
motorist coverage.
• FYI. Collision will pay for your vehicle but not
UNDER insured Motorist
• Underinsured motorist coverage protects the
owner/driver in the event the other driver (at fault) has
insurance but not enough to cover the judgment.
• Your company pays what their company does not (up to
the limit of your policy).
• You are not required to have underinsured motorist
• FYI. Most drivers in NC have 30/60/25 coverage’s. If
you are injured, they may not be able to reimburse your
losses. Their company will only pay the limit of the
policy. The court will not make them pay more. That is
what this coverage is designed for.
• FYI 2. uninsured will NOT pay here.
Gap Insurance
• This type of insurance is fairly new, it is
designed for leases and low down payment
• This is because “book value” is less than
“balance owed”. The Gap.
• If you have Gap coverage, your company will
pay off the loan, if you don’t have this coverage,
you will pay off the difference between what you
owe and what the insurance company pays.
• This is not required. (yet). But it is a good idea.
Towing Insurance
• Towing insurance pays if it is necessary to
have your car towed after a wreck or a
• The maximum it will pay is usually $50 and
does not cover cars parked illegally.
• Not required.
• Bad idea, buy AAA instead.
Rental Reimbursement
• Rental reimbursement coverage will pay
for a rental car when your car is being
repaired under collision coverage.
• If it is property damage, (the other person)
their coverage will pay for your rental car.
• Not required. Not necessary.
No-Fault Insurance
• North Carolina does not have "no-fault"
insurance. But if you run into someone
from a state with this type of coverage,
you will be covered as you would any
other type of coverage in NC.
• Their company will pay, up to the limit of
their policy, if their policy holder is at fault.
• No extra charge.
Another Freebee
• If you rent a car, the rental company
requires you to insure their car.
• If you have comprehensive and collision
on your vehicle, it will cover the rental car
at no extra charge.
Point Systems
• Driver license points are used to revoke a
person's license.
• Insurance points are used to determine
• These are completely separate, DMV does
license points, your company does
insurance points.
Insurance Points
1 point is 25% increase.
2 points is 45% increase
3 points is 60% increase
4 points is 80% increase
5 points is 105% increase
6 points is 130%increase
7 points is 160 increase
8 points is 190% increase
9 points is 225% increase
10 points is 260% increase
11 points is 300% increase
12 points is 340% increase
That is an increase over what you are paying for liability and collision
All insurance points are for three years, date of conviction.
These have changed since the curriculum was written.
Other rating factors
• What the vehicle is used for:
1A. Pleasure use only
1B. To work <10 miles
1C. To work >10 miles + 20% additional premium
3. For business + 25% additional premium
1AF. Farm use -25% reduction of premium
• Where you live and drive.
• It costs more to insure a vehicle in Raleigh
than Belhaven.
• The risk for the insurance company is
greater where traffic and accident rates is
• Driving experience.
• An INexperienced driver pays an
additional 150% for the first two years and
100% for the third year. After three years
experience the rates are supposed to
return to normal.
• They are not supposed to charge based
on age, but now they do. Later.
Multi-car Discount
• If you have more than one vehicle on a
policy, you get a 20% car discount for
each vehicle.
• They assume you will not be driving both
100% of the time.
• The amount of coverage’s (30/60/25,
100/300/50) will effect your premiums.
• Deductibles, as we discussed earlier.
Higher deductibles, lower cost.
• If you have a loan, you will have to
purchase comprehensive and collision.
Vehicle type
• Type of vehicle insured.
• Expensive vehicles cost more to insure.
• Vehicles with high accident rates cost
• Vehicles that are stolen more, cost more.
• Check with your agent before leasing or
buying that new vehicle. It might be quite a
surprise that your mustang costs as much
as a corvette to insure.
Where you live
• Living in North Carolina costs you less too.
Only Idaho, Nebraska, North and South
Dakota and Iowa have cheaper car
• We have regulated prices in NC. Most
states don’t.
• If you are from another state, you might
check on “moving to NC” while you are in
school here.
Credit Rating
• A poor credit rating will up your insurance
rates. (as well as credit cards and bank
• Pay your bills on time.
Combined coverage’s
• If you have your car insurance with the
same company as your homeowners, you
will get both cheaper.
• Of course, if dad is still paying, that is the
best deal you can get. Don’t give him a
reason to stop that. Insurance points are
assigned to the most expensive vehicle on
the policy, that may not be your car.
Senior Citizens
• Those over 50 get cheaper insurance too.
• We get coffee cheaper at Bojangles too.
The Assigned Risk Pool
• Being a high risk driver can put you in the Reinsurance
• This is for every driver that insurance companies do not
want to voluntarily insure.
• This is another way insurance companies legally
discriminate against young people. They will not
voluntarily insure people until they are 23 years old.
• This increases your premiums about 60% with NO
points. Based on age alone.
• 23% of NC drivers are in the Assigned Risk Pool.
Another way we pay
• The "recoup charge" in NC is to pay for losses in
the reinsurance facility.
• Each year all the premiums paid in and the
judgments paid out must equal. So when these
high risk drivers cause more damage than their
premiums can cover, the rest of the policy
holders in NC have to make up the difference.
• That recoup charge is usually an additional 1030% of your total policy premium and is adjusted
each year based on losses.
What is not considered
• Insurance rates in NC are not based on:
Gender, marital status, grades, driver
education or color of the vehicle.
Red cars do not cost more. They should.
Custom paint will cost more.
• Other states do give some discounts for
grades -25%. (3.0 GPA or greater) Driver
education, -%10.
Some ways to save
• There are three insurance point waivers:
• A less than 10 MPH over the speed limit is no
insurance points for the first offense in three
years. School zones do not count;
• You are also allowed a prayer for judgment
continued (PJC) once in three years per
• A second violation for either case results in
revoking of the waiver and receiving both
violation points.
• Going to speeding class. Drops the points.
An example
• A two point violation increases premiums
by 45% for three years.
• So a 10 MPH over ticket will cost you
about $300 in insurance premiums over
the next three years.
• A 12 point DWI will increase your
insurance from $400/year to about $3000
a year for three years (about $7500 total
increase) for liability coverage only.
Comprehensive and collision are even
• Insurance companies are in business to make
money for their stock holders. Not to take care
of you.
• It is your responsibility to read and understand
your insurance policies. What ever the type of
insurance. Remember the flood of 1999? We
learned much about homeowner’s coverage. I
dare you to read your policies about terrorism.
NO terrorist attack is covered for ANYTHING.
• I wish I had time to tell you about some of the
ways insurance companies get out of paying.
Let me tell you one.
• In 1996, hurricane Fran came through
North Topsail Island. Many million dollar
plus homes were destroyed.
• These homeowners had purchased flood
insurance to cover such damage. Sounds
simple, right?
• The insurance companies discovered that
these homes were out of the area that
they were allowed to issue coverage.
So what did they do?
• They refunded the premiums that the
homeowners had paid them.
• What about the millions of dollars that
were in out to sea?
• Too bad! That’s your problem.
• That was 16 years ago and they are still in
• Insurance companies have lots of time
and money to fight these things.
I guess that is why hurricanes look
so much like a toilet.
• To remind you that you are NOT in good hands
with Allstate and Nationwide is NOT on your
• Read and study your insurance policies. They
are written by lawyers, for lawyers.
• Ask questions of your agent and get it in writing.
• NEVER just take an agents word, it must be in
writing. Even having it is writing might not help.
Know where the flood zone is.