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AUTO MODULE - I

AUTO MODULE - I. Introduction to Auto Insurance Basic Policy Structure Liability Coverage Uninsured Motorist Covg Medical Coverage. Personal Injury Protection Exclusions Physical Damage Comprehensive Coverage Towing and Labor Review Exercise. Module Objectives . Insurance Terms.

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AUTO MODULE - I

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  1. AUTO MODULE - I

  2. Introduction to Auto Insurance Basic Policy Structure Liability Coverage Uninsured Motorist Covg Medical Coverage Personal Injury Protection Exclusions Physical Damage Comprehensive Coverage Towing and Labor Review Exercise Module Objectives

  3. Insurance Terms • Peril - The specific event causing a loss, such as fire, windstorm or accidental death. • Hazard - Any factor that increases the chance of loss. • Moral Hazard - subjective characteristic of the insured that increases the chance of a loss. • Morale Hazard - insured’s definite indifference to a loss.

  4. Insurance Terms • Indemnity - To restore the individual to the approximate financial position occupied prior to the loss. • Insurable Interest - A relationship that assures financial loss following the destruction of property. • Deductible - A certain dollar amount beyond which insurance protection begins. • Earned Premium - The portion of the premium that represents coverage already provided.

  5. Insurance Terms • Pro Rata Cancellation - A cancellation by the company that refunds an amount equal to the daily earned premium multiplied by the days remaining in the policy. • Short Rate Cancellation - A cancellation by the insured that refunds the unearned premium minus administrative expenses. • Subrogation - Upon payment of a claim, the insurance company is entitled to the insured’s legal and equitable rights against third parties.

  6. Farmers Auto Companies • MCA - Mid-Century Insurance Company • TFIC - Texas Farmers Insurance Company • TFIC no longer accepting new business • TCM - Texas County Mutual

  7. Mid-Century Insurance Company Mid-Century Insurance Company (MCA) is one of our preferred Companies. In this Company, we will place our prospective insureds who will be less likely to have claims in the future. Because our rates in this Company are very competitive the Underwriting requirements are the very stringent.

  8. Texas County Mutual Texas County Mutual (TCM) In this Company, drivers may pay an increased rate because of moving violations, lack of driving experience, previous claims activity and driving a motor vehicle without maintaining the state minimum liability insurance. Unlike TFIC and MCA, County Mutual rates are not promulgated by the State. Therefore, we are able to offer a wide range of rates based on all of the above mentioned characteristics. In fact, we are even able to offer an Ultra Preferred discount which can reduce their rate below Mid Century’s rates!

  9. Rate Classifications Farmers uses a Rate Classification system to rate for a drivers age, sex, marital status and vehicle use. We have statistical information supporting young single male working drivers are more likely to be involved in an automobile accident than older married female non-working drivers; thus, we can charge a higher premium for these drivers. We cannot and do not use discriminating factors such as race, religion or socioeconomic status to determine rates.

  10. Rate Classifications Adult Rate Classes: There is no male operator under 25 years of age, no unmarried female operator under 21, no operator 65 years or older and: The auto is not used for business nor driven to or from work or school. (Clergy shall be rated as 1A rate classes) Under 25 1A-1 45-49 1A-34 25-29 1A-2 50-54 1A-41 30-34 1A-31 55-59 1A-42 35-39 1A-32 60-64 1A-5 40-44 1A-33

  11. Rate Classifications Adult Rate Classes: There is no male operator under 25 years of age, no unmarried female operator under 21, no operator 65 years or older and: The autois not used for businessbut is driven to/ from work or school more than 50% of the time. Under 25 1B-1 45-49 1B-34 25-29 1B-2 50-54 1B-41 30-34 1B-31 55-59 1B-42 35-39 1B-32 60-64 1B-5 40-44 1B-33

  12. Rate Classifications Adult Rate Classes: There is no male operator under 25 years of age, no unmarried female operator under 21, no operator 65 years or older and: The auto is not used for business but is driven to or from work or school less than 50% of the time. (Or drives to/from park and ride 5 times a week). Under 25 1C-1 45-49 1C-34 25-29 1C-2 50-54 1C-41 30-34 1C-31 55-59 1C-42 35-39 1C-32 60-64 1C-5 40-44 1C-33

  13. Rate Classifications Adult Rate Classes: There is no male operator under 25 years of age, no unmarried female operator under 21, no operator 65 years or older and: The auto/truck is used for business. Under 25 3-1 (3A-1 truck) 45-49 3-34(3A-34 truck) 25-29 3-2 (3A-2 truck) 50-54 3-41(3A-41 truck) 30-34 3-31 (3A-31 truck) 55-59 3-42(3A-42 truck) 35-39 3-32 (3A-32 truck) 60-64 3-5 (3A-5 truck) 40-44 3-33 (3A-33 truck)

  14. Rate Classifications Mature Rate Classes: There is no male operator under 25 years of age, no unmarried female operator under 21, but there is an operator 65 years or older and: Pleasure Work/School Carpool Business / Truck 65-69 6A-0 6B-0 6C-0 8-0 8A-0 70+ 6A-9 6B-9 6C-9 8-9 8A-9

  15. Rate Classifications Youthful Rate Classes: There are one or more male operators under 25 years of age, and the male is either married or not the principle driver of the auto: 2A-11(<17) 2A-12(17-18) 2A-13(19-20) 2A-21(21-22) 2A-22(23-24)

  16. Rate Classifications Youthful Rate Classes: There are one or more male operators under 25 years of age, and the male is unmarried and is the principle driver of the auto: 2C-11(<17) 2C-12(17-18) 2C-13(19-20) 2C-21(21-22) 2C-22(23-24)

  17. Rate Classifications Youthful Rate Classes: There are one or more female operators under 21 years of age, and is unmarried and has no children: 2D1(<17) 2D2(17-18) 2D3(19-20) Note: Female drivers will never get a 2A rate. They will be 2D or Adult Class.

  18. The Property and Casualty Insurance Contract Auto insurance contracts have similar components, which include declarations, insuring agreements, conditions and exclusions (DICE).

  19. The Property and Casualty Insurance Contract Declarations The first page of the policy which indicates the insured’s name, address, coverages, premiums, endorsements, leinholders, discounts/surcharges, vehicles covered, policy number, prematic account number, and the company name.

  20. The Property and Casualty Insurance Contract Insuring Agreements This section sets forth the specific obligations assumed by the insurance company. Here is where the coverages of the policy are broadly defined.

  21. The Property and Casualty Insurance Contract Conditions Here is where the duties and responsibilities of both the insured and insurer are outlined.

  22. The Property and Casualty Insurance Contract Exclusions This section eliminates coverages that were otherwise provided by the insuring agreements. The policy is modified to eliminate duplicate coverage, to remove coverage, to remove coverage not needed by the average insured and exclude perils, risks or property covered by other policies.

  23. Part A - Liability Coverage This coverage protects the insured person against liability for bodily injury or property damage arising out of the ownership, use or maintenance of the insured car. (It agrees to pay damages for which the insured is legally liable.)

  24. Part A - Liability Coverage These are basic auto coverages which are packaged together and must be purchased together. • Bodily Injury - Pays for bodily injury to other people if you are liable. • Property Damage - Pays for damage to other people’s property if you are legally liable.

  25. Part A - Liability Coverage Q. What is the minimum liability limits that a driver must have to operate a motor vehicle in Texas? A. 20/40/15 Q. What does the 20 stand for in 20/40/15? A. The BI limit per person ($20K); this is the max amount the policy will pay any one person per accident or occurrence. Q. What does the 40 stand for in 20/40/15? A. The BI limit per accident or occurrence ($40K); this is the max amount the policy will pay regardless of the number of claimants.

  26. Part A - Liability Coverage Q. What does the 15 represent in 20/40/15? A. A maximum of $15,000 in property damage will be paid per accident or occurrence. Minimum coverage's are insufficient for any insured or applicant who owns a house or has a lot of assets to protect. In such instances, an applicant may want to choose higher limits or purchase an umbrella policy to provide adequate protection. An Umbrella policy is an economical way for insureds to protect their financial security. Discuss the types of persons who may need an Umbrella policy.

  27. Part A - Liability Coverage Liability coverage does not cover: • Bodily injury or property damage caused intentionally by or at the direction of the insured person. • Liability arising out of the ownership or operation of a vehicle used to carry persons or property for a fee. • Damage to owned property. • Bodily injury to an employee arising during the course of employment.

  28. Part B1 - Medical Expense Under this coverage, the company agrees to pay reasonable expenses incurred for necessary medical and/or funeral expenses because of bodily injury sustained by an insured person covered in Texas, in an automobile accident. This coverage is paid regardless of fault. This coverage also applies to the insured and family members as pedestrians, or while in a non-owned automobile.

  29. Part B1 - Medical Expense • The limit of liability is the maximum limit payable for each injured person, regardless of the number of persons injured without a deductible. • For example, a client may select a $10,000 limit per person per occurrence. If this insured person was involved in an accident in which three persons were injured, up to $10K will be paid for each injured party. • In Texas, the options for medical coverage are: • $ 2,500 • $ 5,000 • $10,000

  30. Part B2 - Personal Injury Protection To prevent the long delays some injured accident victims face receiving compensation and avoid expensive litigation, No-Fault plans were introduced. Personal Injury Protection (PIP) is a no-fault insurance protection coverage. PIP coverage covers the same areas Med Pay covers; however, lost wages are also included. An insured cannot carry both Medical and Personal Injury coverages because of the duplication of coverages.

  31. Part B2 - Personal Injury Protection NOTE: Because PIP Coverage is more expensive than Medical Coverage and only adds lost wages, and because many employees get paid for lost time on the job, PIP coverage may not be needed. Research your clients needs before recommending these coverages.As an agent, you must offer PIP coverage to each new applicant. If not wanted, the insured must sign 2 rejection forms declining the coverage. The agent must retain this form in his/her file at all times, and 1 should be sent to Austin.

  32. Part C - Uninsured/Underinsured Motorist Coverage While Texas law requires drivers to carry minimum liability coverage to operate a motor vehicle, the state does not require individuals to maintain Uninsured Motorist Coverage. Because all drivers do not obey the law, uninsured motorists cause problems. When involved in an accident, they can leave motorists without recourse to recover damages. In Texas, UM/UIM coverage must be offered to an applicant when applying for liability coverage's. If not wanted, the applicant must sign 2 rejection forms stating they have been offered this coverage. The signed rejection form must be retained in the agent’s file. Send one to Austin Office.

  33. Part C - Uninsured/Underinsured Motorist Coverage The insuring agreement specifies that we will pay for BI damages that the covered person is legally entitled to recover from the owner or operator of an uninsured or underinsured motor vehicle. The operator of the uninsured vehicle must be responsible for the accident. All losses are subject to a $250 deductible.

  34. Part C - Uninsured/Underinsured Motorist Coverage • Insured person means: • The insured or family members (provided they are residents of the household.) • Other persons occupying the insured vehicle with the insured’s permission. • Persons entitled to recover for damages because of bodily injury to persons described immediately above.

  35. Part D - Physical Damage Covg • This section of the policy contract provides coverage to the insured’s covered automobiles. The major coverage's under this section are: • Comprehensive (Other than Collision - OTC) • Collision • Towing and Labor

  36. Part D - Comprehensive Comprehensive covers damage to the insured vehicle, less any applicable deductible, caused by any accidental means except collision. Q. What types of losses are covered under OTC? A. Breakage of Glass. A. Theft A. Collision with a bird or animal. A. Fire, Hail

  37. Part D - Comprehensive Deductibles for OTC Coverage include: • $ 50 • $ 100 • $ 200 • $ 250 • $ 500 • $1000

  38. Part D - Collision Collision covers damage to the insured vehicle, less any applicable deductible, caused by any accident while driving the covered automobile (unless covered by OTC). Q. What types of losses are covered under Collision? A. Collision with another automobile. A. Collision with a fixed object.

  39. Part D - Towing and Labor Pays for reasonable and necessary towing costs and/or for labor costs necessitated by the disablement of the insured car. This amount is subject to the flat dollar amount selected by the insured. Flat dollar amounts include: $40, $80 and $120. Average towing bills in the Houston area are between $65 and $85.00. 1-800-FARM-TOW is available in the Houston area. The towing company directly bills Farmers for this service.

  40. Part E -Insureds Duties After a Loss • The insured must: • Give prompt notice to the insurance company. This notice should include time, place and circumstances of the loss, as well as names and addresses of injured persons and witnesses. • Prevent further damage. • Notify the police when a hit-and-run driver is involved. • Promptly send company any legal notices related to the loss. • DO NOT ADMIT FAULT.

  41. Farmers Automated System for Glass Loss Assignment & Service (FASGLAS) This program allows you to provide prompt and professional service to clients. After receiving the insured’s report of a damaged windshield, you merely call an 800 number for glass repair or replacement. A Farmers glass representative will then call the insured within 30 minutes and coordinate the repairs. 800 –344-8844

  42. Circle of Dependability (COD) To provide quality service to our customers and speed up the time it takes to repair our insured’s damaged automobiles, Farmers designed the COD program. All COD facilities are inspected by Farmers and meet strict standards. Repairs made by the COD facilities are guaranteed for as long as the insured owns the vehicle (excluding wear and tear).

  43. Review Exercise Q. Briefly explain the purpose of the Declaration page. Q. What are the major sections of the Auto policy? Q. Explain the insured’s duties after a loss. Q. What is the minimum liability limits offered in Texas? Q. What do each of these limits mean?

  44. Review Exercise Q. Can you insure a motorcycle under an auto policy? Q. What coverage protects you if an uninsured motorist runs into your vehicle, injuring you and your passengers? Q. Is there an additional charge for Uninsured Motorist Protection? Q. Discuss the types of documents discussed in this review that the agent is required to maintain in his/her file? Q. Why would an insured want to purchase Medical coverage? Q. Why would an insured want to purchase PIP coverage? Q. Can an insured carry PIP and Med coverage? Why or why not?

  45. Review Exercise Q. What does OTC coverage cover? Q. What is the deductible for a UM claim? Q. Who is covered under your own liability coverage? TIME PERMITTING Discuss liability coverage's and recommendations to insureds on the amount of coverage to carry. Discuss ways to quote and get the policy, even if your “apples to apples” quote is higher than their current provider.

  46. Quote of the Day.. Men and women are limited not by the place of their birth, not by the color of their skin, but by the size of their hope. John Johnson

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