Managing Your Managing Your Personal Finance Personal Finance

UNIT 2: GETTING YOUR FIRST CAR

Topic: CAR INSURANCE

Goals of the day:Goals of the day:• Students will be able to

understand the components and costs of car insurance.

• Students will create a poster that illustrates these components.

Key terms:Key terms:• Premium• Auto Insurance Coverage• Liability• Personal Injury Protection (PIP)

• Collision• Deductible• Policyholder• Uninsured/Underinsured

What is auto insurance What is auto insurance coverage?coverage?

A policy purchased by vehicle owners to cover costs associated with getting into an auto accident or theft of the vehicle.

What is auto insurance What is auto insurance coverage?coverage?Instead of paying for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

MOST COMMON TYPES MOST COMMON TYPES OF AUTO COVERAGE:OF AUTO COVERAGE:

• Auto Liability Coverage:• Personal Injury Protection (PIP)• Medical Payments• Collision• Comprehensive

Cont.

MOST COMMON TYPES OF MOST COMMON TYPES OF AUTO COVERAGE cont.:AUTO COVERAGE cont.:

• Uninsured Motorist• Underinsured Motorist• Rental Reimbursement• Emergency Road Service

Auto Liability Coverage:Auto Liability Coverage:Auto Liability Coverage: pays for the damage if you are legally responsible for accidently injuring someone, or for damaging another vehicle or other property in an auto accident. Cont.

Auto Liability Coverage:Auto Liability Coverage:• Bodily injury liability: covers

medical expenses, pain and suffering, lost wages and other special damages.

• Property damage: covers damaged property and may include loss of use.

Cont.

Auto Liability Coverage:Auto Liability Coverage:

Also pays for legal defense and court costs. State laws usually dictate the minimum amounts of auto liability insurance required, but higher amounts are available.

Personal Injury Personal Injury Protection (PIP):Protection (PIP):

This auto insurance coverage pays the reasonable and necessary medical expenses for covered person for treatment due to an auto accident. Cont.

Personal Injury Personal Injury Protection (PIP):Protection (PIP):

It may also pay for:•Rehabilitation•Lost earnings•Replacement of services (if child or parent is disabled)•Funeral expenses

Medical Payments:Medical Payments:

This coverage pays reasonable and necessary medical and funeral expenses for covered persons when those expenses are related to an auto accident.

Collision:Collision:This coverage helps pay for damage to a covered vehicle by: •Collision with another vehicle•Collision with an object•A vehicle rollover

A deductible is required.

Comprehensive Comprehensive Insurance:Insurance:This coverage helps pay for loss or of damage to an insured vehicle, not caused by a collision or vehicle rollover.

Cont.

Comprehensive Comprehensive Insurance (cont.):Insurance (cont.):Examples of comprehensive damage or loss include:

Fire, wind, hail, flood, vandalism, theft, and hitting an animal.

A deductible may apply.

Uninsured MotoristUninsured MotoristThis coverage pays for damages when a covered person is injured in an auto accident caused by a driver who does not have Liability Insurance. (This coverage varies by state and depends upon your policy.)

Underinsured MotoristUnderinsured MotoristThis coverage pays for damages when a covered person is injured in an auto accident caused by a driver who has insufficient Liability Insurance. (This coverage varies by state and depends upon your policy.)

Rental ReimbursementRental ReimbursementThis coverage pays for renting a car when your auto is disabled due to an auto accident. (Daily allowances or limits varies by state and depends upon your policy.)

Emergency Road Emergency Road ServiceServiceThis coverage pays for having your auto towed due to a breakdown. (Towing limits varies by state and depends upon your policy.)

Who is covered by a Who is covered by a policy?policy?Typically covers:•Policyholder (and spouse)•Relatives who live in your home•Other licensed drivers who have permission from the policyholder

What is an auto What is an auto insurance deductible?insurance deductible?• Deductible is part of a covered

loss that you have agreed to pay with your own money.

• If you file a claim against your insurance, you pay only the amount of your deductible (the insurance pays up to your coverage.)

Cont.

DO NOW:

Insurance Connect Four(see handout)

What is an auto What is an auto insurance deductible?insurance deductible?• Typically, higher

deductibles mean lower auto insurance policy premiums.

What affects car What affects car insurance price?insurance price?Insurance companies look at the following to determine your auto insurance premium:What you buy:•How many coverages you buy•The deductibles Cont.

What affects car What affects car insurance price?insurance price?What kind of car you drive•How many policy coverages you include•The deductibles(Generally, the more expensive the car, the higher the auto insurance price.)

Cont.

What affects car What affects car insurance price?insurance price?Where you drive?Generally, due to higher rates of vandalism theft and accident, urban (city) drivers pay a higher premium than those in small towns or rural areas.

Cont.

What affects car What affects car insurance price?insurance price?How much you drive?Generally, people who use their car for business and long-distance commuting normally pay a higher insurance premium than those who drive less. Cont.

What affects car What affects car insurance price?insurance price?Your age, sex and marital status.Accident rates are higher for all drivers under age 25 (especially young and single males.) Car insurance prices vary between states.

What affects car What affects car insurance price?insurance price?Your driving record.Drivers who cause accidents generally must pay higher car insurance premiums than those who are accident-free for several years.

What affects car What affects car insurance price?insurance price?Your credit history.Many insurance companies consider credit credit characteristics in addition to other factors when determining an individual’s premium.

What can you do to save What can you do to save money on your auto money on your auto insurance premium?insurance premium?When shopping for a car, consider how your choice will affect car insurance premium. (Some companies increase premiums for cars more susceptible to damage or occupant injury.)

Cont.

What can you do to save What can you do to save money on your auto money on your auto insurance premium?insurance premium?

Drive Carefully!

Cont.

What can you do to save What can you do to save money on your auto money on your auto insurance premium?insurance premium?Always ask the insurance agent about available discounts. (For example, some companies provide a discount for students with good academic standing.)

How much coverage do How much coverage do I need?I need?Question #1. How high should the coverage be on my insurance?To consider: how much can you afford to pay for damages exceeding your coverage limits. Cont.

How much coverage do How much coverage do I need?I need?Question #2. How high/low should my collision and comprehensive be?To consider: how much can you afford to pay on short notice in order to save on your premium. Cont.

How much coverage do How much coverage do I need?I need?

Question #3. Should my coverage include collision and comprehensive?To consider: What amounts are you required to carry if your vehicle is leased or financed? Would the savings offset the risk?

Exit Ticket

Please list 3 ways to save money on your car insurance: