CHAPTER 23�AUTOMOBILE INSURANCE�Sharing the Risk

WHAT’S AHEAD

Notes

Finish work that you didn't finish

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How Insurance Works

• Risk Management:
• limiting possible financial losses
• How eliminate risk? Buy INSURANCE!
• Premiums and statistics:
• insurance co. use statistics from past events to predict how many losses are likely to occur within any group of people
• help estimate how much they will have to pay to reimburse particular types of losses

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LESSON 14.1 �Insurance Basics

GOALS

• Describe how insurance works to protect consumers
• Explain the basic kinds of insurance and how to determine the amount to buy

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How Insurance Works

• What insurance protects: protects against the loss of something of value—not to allow you to profit from the loss

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• The insurance trade-off: the goal is to protect you from a financial loss not any loss. Decide how much of a loss you can reasonably cover yourself without too much financial hardship

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***note: malpractice insurance; doctors leaving states…court rewards too high?

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OVERALL INSURANCE BASICS

• Insurance: protection from major financial loss
• You must have insurable interest in the item—if it is lost, it causes you financial harm
• Premium: regular payment to the insurance company
• Policy: document which stipulates what you are protected from
• Claim: formal request for payment from the insurance company
• Deductible: What you pay before the insurance company pays anything
• Example: If your deductible is $1000, and your accident results in $3,000 of damage.
• How much will you pay?
• How much will the insurance pay?
• Increasing the amount of deductible=can save money
• Choosing a higher car insurance deductible amount can lower your premium

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BASIC TYPES OF INSURANCE

• Insurance: protection from major financial loss
• Property: protects you from financial loss of items that are stolen, damaged, or destroyed
• Market value: amount an item is worth now
• Ex: replacing a car
• Replacement value: cost of replacing the item, regardless of market value
• Ex: replacing furniture for a house
• Liability: protects you from losses you cause others
• Personal: protects you and your family from loss due to illness, disability, or death Ex: Health/Life

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Types of Automobile �Insurance Coverage

• Bodily injury liability coverage
• Medical payments coverage
• Uninsured/underinsured motorist coverage
• Property damage liability coverage
• Comprehensive coverage
• Collision coverage
• Additional coverage options

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• LIABILITY--25/50/20
• BODILY INJURY
• applies when your car injures or kills pedestrians, persons riding in other cars or passengers in your car
• pays for legal defense
• term 25/50 & 250/500
• 100/300 recommended
• PROPERTY DAMAGE
• last # (20 is required)
• /100 is recommended
• Illinois Mandatory Limits

• MEDICAL PAYMENTS
• pays the hospital, treatment and funeral costs.
• For injuries that you, members of your immediate family, or relatives living with you suffer in ANY accident.
• coverage even if you caused accident

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• LIABILITY--25/50/20
• BODILY INJURY
• applies when your car injures or kills pedestrians, persons riding in other cars or passengers in your car
• pays for legal defense
• term 25/50 & 250/500
• 100/300 recommended
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25/50/20

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25K - bodily Injury to each

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50k - bodily per accident

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10K in property

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COVERAGES (CONT’D)

• COLLISION

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• pays for the repair or replacement of your car after a colliding accident.

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• always need this coverage for new cars.
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• COMPREHENSIVE

TOP 10 MOST STOLEN CARS

• protects YOUR car against fire, theft, glass breakage, flood, vandalism, etc. (non-accidents)

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Chapter 14

INSURANCE COVERAGE

SKOKIE RATES

INSURANCE COVERAGE

GLENVIEW RATES

How Much Insurance �Should You Buy?

• Liability and Medical Payments
• Purchase enough to cover injuries that might result from an accident
• Should consider $100,000 or more
• More coverage does not cost much more
• Collision and Comprehensive
• “FULL COVERAGE” -- Covers damage to Your Car!
• Cost depends on value of your car and deductible
• If you have an old car, collision may not even be worth buying
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WHAT TYPES OF COVERAGES WOULD YOU USE FOR THIS ACCIDENT?

OTHER TYPES OF COVERAGES

• Uninsured Motorists Property Damage
• Underinsured Motorists Coverage
• Towing and Labor/Rental Car
• Motorcycle Insurance
• works the same as auto insurance

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Cost of Automobile Insurance

• Causes of increasing insurance costs
• Cars more complicated; more expensive to repair; medical costs rising; lighter cars result in more serious injuries; higher jury awards.
• Factors affecting your premium
• Driver classification (age, gender, marital status)
• Rating territory (rural cheaper than urban)
• Driving record (accidents, traffic violations)
• Type of car
• Claims history
• Credit history/FICO score

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Cost of Automobile Insurance (cont.)

• Reduce your premiums
• Drive carefully—keep your record clean
• Drive a moderately priced car
• Discounts for safety features: airbags, abs, security
• Good student discount: (“A” or “B”)
• Take drivers education course
• Live in safe neighborhood outside the city
• Increase deductibles-$500 or $1,000

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