Car Insurance : Do you have the facts?Car Insurance : Do you have the facts?

Adapted by Dr. Vivian G. BaglienAuburn Mountainview High School

Learning target: Students will understand and apply insurance data to making good decisions about insured driving.

21st Century Skills: 2.C.1   Effectively analyze and evaluate evidence, arguments, claims and beliefs

SL2 Integrate multiple sources of information presented in diverse formats and media (e.g., visually, quantitatively, orally) in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data.

FCS 2.6 Demonstrate management of financial resources to meet the goals of individuals and families across the life span. FCS 2.6.1 Evaluate the need for personal and family financial planning.

Elements of a ContractElements of a Contract• Must be an agreement based upon a definite offer

by one party and the acceptance of that offer by the other party

• The two parties must be legally competent to make a contract

• There must be a consideration; both parties must give something of value and both must receive something of value

• The contract must have a legal purpose

InsuranceInsurance• Indemnity Principle: legal doctrine stating that the function of

insurance is to repay (indemnity) insured's for their actual losses

o Insurable interest: Insured (You) must be in position to sustain

financial loss in the event involved in an accidento Loss measurement: A way to determine the amount of

payment when a loss occurs o Car Insurance: Market value- loss usually repaid at value of

vehicle at time of loss.

Auto AccidentsAuto Accidents

Casual factors in Fatal Auto Accidents

Factor Percent of Cases

Improper driving 75.9

Speed too fast 30.1

Right of way violation 14.1

Drove left of center 10.5

Other improper driving 21.2

No improper driving 24.1

The time with the most fatal accidents is weekend nights between midnight and 3am.

Fires occurred in .1 percent of all accidents but in 3 percent of fatal accidents.

People ages 16-20 had the highest fatality and injury rates in car accidents per 100,000 people.

39 percent of fatal crashes involved alcohol. Between midnight and 3 AM

• After 3AM the percentage rose to 76%.

Accident Facts

Kinds and Amounts of Kinds and Amounts of CoverageCoverage

Cost of insurance depends upon the kind and amounts that are

purchased

More coverage purchased and the higher the limits, the greater the

cost

Liability Limits Factor

$25,000 1.00

$50,000 1.13

$100,000 1.22

$500,000 1.48

Premiums Premiums Classification System: a method of establishing the price of individual insurance policies by classifying policyholders in groups-each have similar characteristics

o Ageo Gendero Marital Statuso Geographyo Driving Violationso Vehicle Typeo Accident Claimso Credit Rating

o Occupationo Educationo Driving Distance to Worko Miles Driven each yearo Years of driving

experienceo Whether or not you

currently have auto insurance and how

high are your limits o Theft protection devices

(often results in discounts) o Multiple cars and drivers

(another opportunity for discounts)

Insurance FraudInsurance FraudSoft auto-insurance fraud:

o filing more than one claim for a single injury

o filing claims for injuries not related to an automobile accident

o misreporting wage losses due to injuries

o reporting higher costs for car repairs than those that were actually paid

Hard Insurance Hard Insurance FraudFraud

o Staging automobile collisions

o Filing claims when the claimant was not actually involved in the accident

o Submitting claims for medical treatments that were not received

o Inventing injuries

o Illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called "rate evasion".

o “Fronting“: registering someone other than the real primary driver of a car as the primary driver of the car.

o Falsely report their vehicle as stolen

Bodily Injury Bodily Injury Coverage : Coverage :

I. Bodily injury liability- for the risk of financial loss due to legal expenses, medical expenses and other expenses caused by an automobile accident for which you are responsible.

II. Medical Payments – covers the cost of healthcare for people who are injured in your vehicle.

III.Uninsured Motorists Protection- covers the cost of injury if you are hit by an uninsured driver.

Property Damage Property Damage CoverageCoverage::

Protect from financial loss due to damage of other people’s property or your vehicle.

I. Property Damage Liability – protects from damage to other people’s property, street signs, lampposts, buildings etc. The last number in the Split Limit represents the property damage liability (100/200/50).

II.Collision- covers the damages to a vehicle in case of an accident. However, if you are not at fault, the insurance might try to recover the money from the other insurance Company ( Subrogation).

III.Comprehensive Physical Damage – Covers you for other risks such as wind, vandalism, fire , theft, falling objects etc.

Washington State Washington State LiabilityLiability

The auto insurance policy must have limits of at least:• $25,000 of bodily injury or death of 1 person in any 1 accident. • $50,000 of bodily injury or death of any 2 people in any 1 accident. •$10,000 of injury to or destruction of property of others in any 1 accident.

• These are minimum rates.

Proof of Insurance – Proof of Insurance – It’s the LawIt’s the Law

Showing proof of insurance:

• If stopped by law must have proof of insurance

• No Proof of insurance (traffic violation).

•Your proof-of-insurance card shows that either you or your vehicle are covered by liability insurance.

• Card sent by insurance company

• Not needed for motorcycles

Coverage Limit and DeductiblesCoverage Limit and Deductibles

Coverage Limit :• Your auto insurance coverage limit is the highest

dollar amount an insurance company will pay if you make a claim on a covered loss (that's insurance-speak for any losses that fall within the bounds of your policy).

• The higher your coverage limit, the more the company pays, but the higher your premiums will be to obtain that coverage.

• Lowering your coverage limit is a good way to bring your premiums down and save money now, even if you may need to pay more out-of-pocket later, after an accident.

Deductibles:Deductibles:

• Your deductible is the amount of money you agree to pay out-of-pocket (on your own) when you make a claim covered by your policy.

• This means, for example, that if your repairs cost $1,500 and you've set your deductible at $500, theoretically, you'll pay the first $500, and the company will pay the remaining $1,000 to get your car fixed and back on the road.

Auto Insurance Premium Auto Insurance Premium FactorsFactors

oAge -.oGender –oMarital Status – oGeography –.oVehicle Type –. oAccident Claims – oDriving record _

Auto Insurance Auto Insurance Premium FactorsPremium Factors

oDriving Violations -. oNumber of miles driven -.oCoverage oDiscounts.oMiles driven-.oCredit Rating-.oOccupation

How do you reduce the How do you reduce the PremiumPremium

Discounts:

• Discounts for Safe Drivers:

• Defensive driver class discount

• Passive Restraint Systems

• Auto Safety features

• Good Student discount

How do you reduce How do you reduce the Premium ?the Premium ?

• Multiple vehicles discount

• Deductibles – higher limits

• Have a policy with no lapse in it

• Safe Driver Record

• Good Student Discount

• Cover all insured property with one company- cars, house, boats, etc.

How do Claims affect How do Claims affect Premiums?Premiums?

Auto claim premiums are affected by three main factors:

• ISO Symbols : To determine the cost of repair to a vehicle after an accident

• This service rates every vehicle produced in the USA and throughout the world with a symbol, called an “ISO symbol

• In general, the higher the vehicle cost, the more expensive to repair, and a higher policy premium cost required.

How do Claims affect How do Claims affect Premiums?Premiums?

Driving Record:• Your premiums are based upon a rating system• Almost all insurance company premiums are

based upon an “allocation” type of rating system.

• This system is set up in order to allocate policy premiums fairly and is based upon several factors-

o How safe is you driving record? o Costs more than just cost of your vehicleo Based upon a driver’s statistical likelihood of

creating claimso Highly rewards safe drivers

ReferencesReferences• Allstate Insurance as retrieved October 3, 2012

http://www.allstate.com/auto-insurance/Washington-state-info.aspx

• Bertot, C. (1986)New financial planner a guide to client service. Homewood, Ill: Dow Jones-Irwin,

• Crane, F. (1980. Insurance principles and practices. New York: Wiley,

• "Factors that affect your car insurance premium." Car Insurance: Get an auto insurance quote, car insurance quotes and a fast online insurance policy.

as retrieved Apr. , 26,2009 http://www.carinsurance.com/Articles/content6.aspx

• Kapoor, J. (1991)Personal finance. Homewood, IL: Irwin