1. Automobile Insurance: The Basics

2. Automobile Insurance: The Basics
What is the likelihood you will be in anWhat is the likelihood you will be in an
automobile accident?automobile accident?
There are more than 12 million motor vehicle accidentsThere are more than 12 million motor vehicle accidents
annuallyannually
The typical driver will have a near automobile accident one orThe typical driver will have a near automobile accident one or
two times per monthtwo times per month
The typical driver will be in a collision of some type on averageThe typical driver will be in a collision of some type on average
of every 6 yearsof every 6 years
Crashes are the leading cause of death for ages 3-33Crashes are the leading cause of death for ages 3-33

3. Automobile Insurance: The Basics
Even a minor accident can result in thousands ofEven a minor accident can result in thousands of
dollars in damagesdollars in damages
•Damage to your carDamage to your car
•Damage to other cars involvedDamage to other cars involved
•Medical BillsMedical Bills
•Lost wagesLost wages
•Pain and sufferingPain and suffering
•ProsecutionProsecution
•Legal FeesLegal Fees
•FinesFines

4. Automobile Insurance: The Basics
What is Automobile Insurance?What is Automobile Insurance?
An auto insurance policy is a contract between youAn auto insurance policy is a contract between you
and an insurance company.and an insurance company.
You pay a premium, and in exchange, the insuranceYou pay a premium, and in exchange, the insurance
company promises to pay for specific car-relatedcompany promises to pay for specific car-related
financial losses during the term of the policy.financial losses during the term of the policy.

5. Automobile Insurance: The Basics
If you are in an accident how doIf you are in an accident how do
you pay for it?you pay for it?
Bank Account?Bank Account?
Parents?Parents?
Rich Uncle?Rich Uncle?
Best Friend?Best Friend?
Insurance?Insurance?

6. Why do I need auto insurance
• It’s the law!It’s the law!
• There are risks you can’t afford to takeThere are risks you can’t afford to take
• What happens if…What happens if…
– You’re involved in a crash that causes propertyYou’re involved in a crash that causes property
damage?damage?
– You hurt yourself or someone else?You hurt yourself or someone else?
– Your car is damaged when you’re not driving it?Your car is damaged when you’re not driving it?
(by weather, vandalism or a hit-and-run)(by weather, vandalism or a hit-and-run)
– Your car is stolen?Your car is stolen?
– Your car breaks down and needs to be towed?Your car breaks down and needs to be towed?

7. Automobile Insurance: The Basics
Are you a risk to the insuranceAre you a risk to the insurance
company?company?
To keep premiums as low as possible to the insured,To keep premiums as low as possible to the insured,
a screening process is completed before ana screening process is completed before an
insurance contract is completedinsurance contract is completed

8. Automobile Insurance: The Basics
What is the insurance companyWhat is the insurance company
looking for?looking for?
Some vehicles, and some drivers, carry more riskSome vehicles, and some drivers, carry more risk
than othersthan others
•Low risks will be charged a lower premiumLow risks will be charged a lower premium
•High risks will be charged a higher premiumHigh risks will be charged a higher premium

9. Automobile Insurance: The Basics
What determines your premium?What determines your premium?
AgeAge
GenderGender
Vehicle TypeVehicle Type
Driving RecordDriving Record
Geographic LocationGeographic Location

10. What is a Deductible?
This is the amount per accident that you pay outThis is the amount per accident that you pay out
of pocket before insurance starts to payof pocket before insurance starts to pay
Common deductible amounts are usually $250,Common deductible amounts are usually $250,
$500, and $1000$500, and $1000
The higher the deductible amount you pay theThe higher the deductible amount you pay the
lower your premiums arelower your premiums are

11. Automobile Insurance: The Policy
A common mistake when shopping forA common mistake when shopping for
automobile insurance is looking only at theautomobile insurance is looking only at the
price between two policiesprice between two policies
Policies differ from policy to policy andPolicies differ from policy to policy and
company to companycompany to company

12. Five parts to an insurance policyFive parts to an insurance policy
DeclarationsDeclarations: Summarizes the policy.: Summarizes the policy.
Coverage'sCoverage's: Listing of what the insurance covers – the more it covers,: Listing of what the insurance covers – the more it covers,
the more it will cost.the more it will cost.
ExclusionsExclusions: Instances when your policy won’t provide coverage.: Instances when your policy won’t provide coverage.
Conditions:Conditions: The manner in which the contract is valid. Such as inThe manner in which the contract is valid. Such as in
order for the policy/contract to be maintained the car must be in roadorder for the policy/contract to be maintained the car must be in road
worthy condition or the contract is breached.worthy condition or the contract is breached.
Definitions:Definitions: Each policy defines what your coverage entails. This canEach policy defines what your coverage entails. This can
vary policy to policy.vary policy to policy.
Automobile Insurance: The Policy

13. Automobile Insurance: The Basics
What can you do to reduce risk andWhat can you do to reduce risk and
lower premiums?lower premiums?
Use your seatbeltUse your seatbelt
Observe Speed LimitsObserve Speed Limits
Know your own limitsKnow your own limits
Concentrate on drivingConcentrate on driving
Be PatientBe Patient
Don’t Drink and DriveDon’t Drink and Drive
Get good gradesGet good grades

14. KEY TERMS
• Bodily Injury Liability: In auto
insurance, liability coverage that
pays for physical injury to people
in other vehicles
• Collision: The act or process of
colliding; a crash or conflict.
• Comprehensive Coverage:
Insurance designed to pay for the
repair or replacement of the policy
owner's car in the event of
damage not resulting from an
accident.
• Medical Payments: Auto
insurance coverage can help to
provide medical payment for
treatment of bodily injury.
• Peril: A cause of loss
• Policyholder: The owner of an
insurance policy
• Premium: Payment made by the
insured to the insurer

15. KEY TERMS
• Insurance Policy: A contract
written to protect individuals
named in the policy against
specific future losses
• Insured: An individual, usually but
not always the buyer, covered by
an insurance policy
• Insurer: The company or agency
that writes an insurance policy
• Liability: Legal responsibility
.
• Risk: A situation in which some
kind of loss is possible
• Deductible: The amount the
insured pays on a claim before the
insurer pays the remainder
• Coverage: Coverage against a
specific type of loss
• Replacement Cost: What it would
cost to replace a piece of property,
or rebuild a structure