liability insurance - Financial protection against accidents that cause bodily injury and property damage.comprehensive insurance - Insurance protection from losses due to fire, vandalism, theft, and other causes.collision insurance - Insurance that pays to repair a vehicle if it’s involved in an accident.

deductible clause - An insurance clause that requires the insured to pay a certain amount before the insurance company pays.

9.4 Key Words to Know: Insurance

What factors affect your insurance premium?Each factor is a statistically based risk for a specific population. The higher the risk associated with a person, the more he or she is likely to pay for coverage. Common factors: •Miles driven per year•Vehicle purpose (commuting to work, using for work, leisure only)•Age - Statistically, drivers under the age of 25 are at greater risk of being in an accident than those over age 25. Drivers between the ages of 50 and 65 generally have the safest records.•Gender - Women are statistically safer drivers.•Marital Status - A married person will pay less than a single person with an identical driving record.

Each insurance company assesses risks slightly differently – so shop around, but you will get the best deal if you have multiple policies with the same provider.

How do I find the annual base premium? Liability Premium Comprehensive Premium+ Collision Premium____________________ Annual Base Premium

Formulas:

How do I calculate the annual premium? Annual Base Premium× Driver-Rating Factor____________________ Annual Premium

Why might someone never have collision insurance on an old truck?

Della Welch is the principal operator of her vehicle. Her driver-rating factor is 2.20. Her insurance includes 50/100 bodily injury and $50,000 property damage. Her vehicle is in age group A and insurance-rating group 13 (or A, 13). She has $50-deductible comprehensive and $50-deductible collision insurance. What is her annual base premium? What is her annual premium? (Use Figure 9.3 on page 324 of your textbook to find important information for this problem.)

Example 5

Step 1: Find the annual base premium.

Liability + Comprehensive + CollisionPremium Premium Premium$237.20 + $108.00 + $287.20 =

$632.40

Step 2: Find the annual premium.Base Premium × Driver-Ratio Factor$632.40 × 2.20 = $1,391.28

Example 5 Answer:

Use Figure 9.3 on page 324 of your textbook. Soseki Nagamatus has a driver-rating factor of 3.1. His insurance includes 100/300 bodily injury limits and $100,000 property damage limits. His vehicle is in age group B and insurance-rating group 15 (B, 15). He has $50-deductible comprehensive and $50-deductible collision insurance. What is his annual premium?What is annual base premium?

Example 6

Step 1: Find the annual base premium.Liability + Comprehensive + Collision$272.40 + $128.40 + $311.20 = $712.00

Step 2: Find the annual premium.Base Premium × Driver-Rating Factor$712.00 × 3.1 = $2,207.20

Example 6 Answer:

Driver-rating factor: 2.0.Age, rating group: C, 15.Coverage: 300/300 bodily injury, $100,000 property damage, $50-deductible comprehensive, and $50-deductible collision.What is the annual base premium? What is the annual premium?

Practice

Annual base premium: $720.80 Annual premium: $1,441.60

Jason Edwards drives his car to and from work and for pleasure. His driver-rating factor is 2.50. He has $50-deductible comprehensive, $50-deductible collision, 50/100 bodily injury, and $50,000 property damage insurance. His vehicle is classified as D, 14. What is his annual base premium? What is his annual premium?

Practice

Annual base premium: $607.60Annual premium: $1,519