Transcript Purposes of Consumer Protection Laws

Activity
Risky Business
Automobile Insurance
Today’s Learning Objective
How does auto insurance
work?
•
•
•
•
•
•
Automobile Liability
No-Fault
Collision
Other-than-Collision (Comprehensive)
Uninsured/Underinsured Motorist
Other coverages
Automobile Insurance
•
•
•
•
Policy can be made up of many parts
Some required
Some optional
The more coverage you want, the
higher your premium
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
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
• $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
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
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.)
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
• 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
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
“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
• “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 postrepair value of the vehicle
• 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”
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)
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
• 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-thancollision coverage
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
Insurance Institute for
Highway Safety (IIHS)
Highway Loss Data Institute
(HLDI)
Assignment
Auto Insurance