Why insurance?

1. Why insurance? • I want you to be an informed consumer of a product we all have to have. • Each of us has multiple types of policies and coverage’s. • You can be insurance poor.

2. Insurance, the most confusing of all units we do. Pay attention. • Any form of insurance is that, you pay a relatively small amount, so no one getscaught with a large financial loss • i.e. a $500/year homeowners policy will pay for a $100,000 house or a $500,000 lawsuit.

3. All Insurance • All forms of insurance are the same concept. You attempt to protect against a large financial loss. Homeowners, life, health, renters, flood, disability, dental are just some of the forms of insurance other than car insurance. • All insurance companies are in business to make money for their stock holders, read the fine print.

4. Car insurance in NC • In North Carolina, as most other states, a owner/driver is required to prove financialresponsibility in order to legally operate a motor vehicle. • A driver must be responsible for any damage he/she does to someone else or their property.

5. Financial Responsibility • There are actually two ways to prove financial responsibility, post a cash bond (in effect, self insuring you and/or your company) or buy liability insurance.

6. Coverage's • Personal Injury Liability insurance protects the owner/driver against having to pay for injuries they have caused to others. • Insurance companies will pay up to the limit (amount purchased) of the policy. The minimum amount allowed by law in NC is $60,000 per accident (All persons injured) and $30,000 per person (any one person). • This is not enough coverage to adequately protect you if you seriously hurt someone. 100/300 or 300/300 might be a better choice even if it costs a little more in premiums. • Typical ICU costs about $10,000/day.

7. Property Damage Liability insurance pays for damage you do to another person's property (car, house, yard, mailbox, etc.). Your company will pay, up to the limit of the policy, to fix other's property. • NC requires a minimum of $25,000 PDL. For about $10 more per year, you can buy $100,000 coverage. If you hit a new vehicle, you will need more than $25,000.

8. Why buy more? • All the costs above the insurance, are your responsibility. You will be required to pay whatever your insurance company does not for an “at Fault” accident. • That includes garnishing your future wages. • Increasing your coverage’s is cheap in the big picture.

9. DL 123 Form • DMV requires proof of both types of liability insurance to get a license plate or a driver's license. • A DL 123 form is filled out by an insurance agent as proof of liability coverage’s. PI and PD • A lapse in coverage is a $50 penalty per vehicle. It might cost you the plate for however long DMV chooses. • Insurance companies are required to notify DMV if you no longer have insurance, for whatever reason.

10. Collision coverage • Collision insurance protects your car when you are at fault in a collision. Your company will pay up to the "book" value of your car in the event you damage it,minus the deductible. • Deductibles are the portion you pay first before the insurance company pays. Collision deductibles are usually $250-$1000. The higher the deductible, the lower the premium. • Collision claims will raise your future premiums for three years because you are at fault. • Collision is required by the bank if you lease or borrow money against your vehicle. • FYI, Collision will pay for your vehicle’s damage if the other driver, at fault, does not. For whatever reason, with no increase in premium.

11. Comprehensive Coverage • Comprehensive insurance pays to repair your vehicle from "acts of God," or theft, vandalism, flood, even a deer damaging your car. Any damage that you are not responsible for. • Again your company will pay up to the book value. Comprehensive claims should not increase your rates because they are not your fault. • Comprehensive is also required for a loan or lease. • Don’t hit two deer, you will be dropped from this coverage as too high a risk.

12. Medical Payments • Medical payments insurance pays for you or your passengers medical bills, regardless of fault, up to the limit of the policy. $10,000 is currently the maximum amount available in NC. • This will pay for minor injuries, ambulance, ER visits, and deductibles on major medical policies. It is not intended to cover all medical bills. • You are not required to have medical payments coverage. If you have major medical, you may not need this coverage too.

13. Uninsured Motorist • Uninsured motorist coverage protects the owner/driver against another driver, at fault, not having any insurance. • Your company will pay your medical and vehicle repair bills if the other driver does not have insurance (up to the limit of your policy). • You are nowrequired to have uninsured motorist coverage. • FYI. Collision will pay for your vehicle but not medical.

14. UNDER insured Motorist • Underinsured motorist coverage protects the owner/driver in the event the other driver (at fault) has insurance but not enough to cover the judgment. • Your company pays what their company does not (up to the limit of your policy). • You are not required to have underinsured motorist coverage. • FYI. Most drivers in NC have 30/60/25 coverage’s. If you are injured, they may not be able to reimburse your losses. Their company will only pay the limit of the policy. The court will not make them pay more. That is what this coverage is designed for. • FYI 2. uninsured will NOT pay here.

15. Gap Insurance • This type of insurance is fairly new, it is designed for leases and low down payment loans. • This is because “book value” is less than “balance owed”. The Gap. • If you have Gap coverage, your company will pay off the loan, if you don’t have this coverage, you will pay off the difference between what you owe and what the insurance company pays. • This is not required. (yet). But it is a good idea.

16. Towing Insurance • Towing insurance pays if it is necessary to have your car towed after a wreck or a breakdown. • The maximum it will pay is usually $50 and does not cover cars parked illegally. • Not required. • Bad idea, buy AAA instead.

17. Rental Reimbursement • Rental reimbursement coverage will pay for a rental car when your car is being repaired under collision coverage. • If it is property damage, (the other person) their coverage will pay for your rental car. • Not required. Not necessary.

18. No-Fault Insurance • North Carolina does not have "no-fault" insurance. But if you run into someone from a state with this type of coverage, you will be covered as you would any other type of coverage in NC. • Their company will pay, up to the limit of their policy, if their policy holder is at fault. • No extra charge.

19. Another Freebee • If you rent a car, the rental company requires you to insure their car. • If you have comprehensive and collision on your vehicle, it will cover the rental car at no extra charge.

20. Point Systems • Driver license points are used to revoke a person's license. • Insurance points are used to determine rates. • These are completely separate, DMV does license points, your company does insurance points.

21. Insurance Points • 1 point is 25% increase. • 2 points is 45% increase • 3 points is 60% increase • 4 points is 80% increase • 5 points is 105% increase • 6 points is 130%increase • 7 points is 160 increase • 8 points is 190% increase • 9 points is 225% increase • 10 points is 260% increase • 11 points is 300% increase • 12 points is 340% increase • That is an increase over what you are paying for liability and collision coverage’s. • All insurance points are for three years, date of conviction. • These have changed since the curriculum was written.

22. Other rating factors • What the vehicle is used for: 1A. Pleasure use only1B. To work <10 miles1C. To work >10 miles + 20% additional premium3. For business + 25% additional premium1AF. Farm use -25% reduction of premium

23. Continued • Where you live and drive. • It costs more to insure a vehicle in Raleigh than Belhaven. • The risk for the insurance company is greater where traffic and accident rates is greater.

24. Driving experience. • An INexperienced driver pays an additional 150% for the first two years and 100% for the third year. After three years experience the rates are supposed to return to normal. • They are not supposed to charge based on age, but now they do. Later.

25. Multi-car Discount • If you have more than one vehicle on a policy, you get a 20% car discount for each vehicle. • They assume you will not be driving both 100% of the time.

26. Limits • The amount of coverage’s (30/60/25, 100/300/50) will effect your premiums. • Deductibles, as we discussed earlier. Higher deductibles, lower cost. • If you have a loan, you will have to purchase comprehensive and collision.

27. Vehicle type • Type of vehicle insured. • Expensive vehicles cost more to insure. • Vehicles with high accident rates cost more. • Vehicles that are stolen more, cost more. • Check with your agent before leasing or buying that new vehicle. It might be quite a surprise that your mustang costs as much as a corvette to insure.

28. Where you live • Living in North Carolina costs you less too. Only Idaho, Nebraska, North and South Dakota and Iowa have cheaper car insurance. • We have regulated prices in NC. Most states don’t. • If you are from another state, you might check on “moving to NC” while you are in school here.

29. Credit Rating • A poor credit rating will up your insurance rates. (as well as credit cards and bank loans) • Pay your bills on time.

30. Combined coverage’s • If you have your car insurance with the same company as your homeowners, you will get both cheaper. • Of course, if dad is still paying, that is the best deal you can get. Don’t give him a reason to stop that. Insurance points are assigned to the most expensive vehicle on the policy, that may not be your car.

31. Senior Citizens • Those over 50 get cheaper insurance too. • We get coffee cheaper at Bojangles too.

32. The Assigned Risk Pool • Being a high risk driver can put you in the Reinsurance Facility. • This is for every driver that insurance companies do not want to voluntarily insure. • This is another way insurance companies legally discriminate against young people. They will not voluntarily insure people until they are 23 years old. • This increases your premiums about 60% with NO points. Based on age alone. • 23% of NC drivers are in the Assigned Risk Pool.

33. Another way we pay • The "recoup charge" in NC is to pay for losses in the reinsurance facility. • Each year all the premiums paid in and the judgments paid out must equal. So when these high risk drivers cause more damage than their premiums can cover, the rest of the policyholders in NC have to make up the difference. • That recoup charge is usually an additional 10-30% of your total policy premium and is adjusted each year based on losses.

34. What is not considered • Insurance rates in NC are not based on: Gender, marital status, grades, drivereducation or color of the vehicle.Red cars do not cost more. They should. Custom paint will cost more. • Other states do give some discounts for grades -25%. (3.0 GPA or greater) Driver education, -%10.

35. Some ways to save • There are three insurance point waivers: • A less than 10 MPH over the speed limit is no insurance points for the first offense in three years. School zones do not count; • You are also allowed a prayer for judgment continued (PJC) once in three years per household; • A second violation for either case results in revoking of the waiver and receiving both violation points. • Going to speeding class. Drops the points.

36. An example • A two point violation increases premiums by 45% for three years. • So a 10 MPH over ticket will cost you about $300 in insurance premiums over the next three years.

37. A DWI • A 12 point DWI will increase your insurance from $400/year to about $3000 a year for three years (about $7500 total increase) for liability coverage only. Comprehensive and collision are even more.

38. Conclusion • Insurance companies are in business to make money for their stock holders. Not to take care of you. • It is your responsibility to read and understand your insurance policies. What ever the type of insurance. Remember the flood of 1999? We learned much about homeowner’s coverage. I dare you to read your policies about terrorism. NO terrorist attack is covered for ANYTHING. • I wish I had time to tell you about some of the ways insurance companies get out of paying.

39. Let me tell you one. • In 1996, hurricane Fran came through North Topsail Island. Many million dollar plus homes were destroyed. • These homeowners had purchased flood insurance to cover such damage. Sounds simple, right? • The insurance companies discovered that these homes were out of the area that they were allowed to issue coverage.

40. So what did they do? • They refunded the premiums that the homeowners had paid them. • What about the millions of dollars that were in out to sea? • Too bad! That’s your problem. • That was 16 years ago and they are still in court. • Insurance companies have lots of time and money to fight these things.

42. I guess that is why hurricanes look so much like a toilet. • To remind you that you are NOT in good hands with Allstate and Nationwide is NOT on your side. • Read and study your insurance policies. They are written by lawyers, for lawyers. • Ask questions of your agent and get it in writing. • NEVER just take an agents word, it must be in writing. Even having it is writing might not help. Know where the flood zone is.