Chapter

1. 33 Chapter pp. 532-547 Vehicle Insurance

2. Why It’s Important Most states require you to have some form of vehicle insurance. To get the best value, you need to know the choices in coverage and the costs of insurance.

3. Financial Responsibility Law A financial responsibility law says you must pay for any damage or injury you cause in an accident either with insurance, with savings, or by selling property.

4. Compulsory Insurance Law A compulsory insurance law legally requires drivers to have a minimum amount of car insurance. If you can’t show proof of insurance, you can have your license or registration taken away from you.

5. Types of Vehicle Insurance Insurance is paid protection against losses due to injury or property damage. To get insurance, you have to purchase a contract called a policy from an insurance company.

6. Types of Vehicle Insurance The company that issues the policy is called the insurer. The buyer of the policy is called the policyholder.

7. Types of Vehicle Insurance Liability insuranceprotects you from claims of bodily injury or propertydamage to others in case you’re held responsible for an accident.

8. Bodily Injury Liability Bodily injury liability insurance covers injuries to someone else that you are held responsible for.

9. Property Damage Liability Property damage liability insurance covers damage to another person’s vehicle or other property that you are held responsible for. It also covers damage to property, such as telephone poles or street signs.

10. Collision Insurance Collision insurance covers damages to your own vehicle whenyou are held responsible.

11. Comprehensive Coverage Comprehensive insurance covers damage to a your vehicle caused by things other than a car accident. Like WHAT?

12. Comprehensive Coverage Comprehensive insurance covers losses from falling objects, theft, flood damage, vandalism, and other causes.

13. Collision/Comprehensive The maximum amount covered is based on theactual cash value of your vehicle, which is the value of the car when it’s new minus depreciation. Depreciation is the decline in value of a vehicle because of use.

14. Medical Payments Coverage Medical payments coverage is also called personal injury protection. It covers injuries to you and anyone else in your car whenyou are held responsible.

15. Uninsured Motorist Protection Uninsured motorist coverage protects youfrom people who can’t pay insurance claims. Most states require this coverage.

16. No-Fault Insurance No-fault insurance requires drivers involved in accidents to collect damages from their own insurance companies no matter who is at fault.

17. Miscellaneous Coverage Other things insurance will cover are if you purchase it: • Rental cars • Towing expenses • Additional drivers • Motorcycles • Snowmobiles

18. The Costs of Insurance The costs of insurance are directly affected by the amount of money insurers pay each year in insurance claims.

19. The Costs of Insurance A claim is a request for payment from an insurer for any damages covered by a policy.

20. Insurance Premiums The amount an insurance company charges a policyholder for an insurance policy is called the premium (the cost of the insurance).

21. Insurance Premiums An insurance company can cancel a policy or refuse coverage for someone with a record of accidents.

22. Deductible A deductible is an amount in damages a policyholder must pay before the insurance company pays anything.

23. Deductible A deductible makes you responsible for small losses and the insurance helps pay for the larger losses. Self-Insure for smaller damages. The higher your deductible, the lower your premium.

24. Factors Affecting the Costs of Insurance There are a variety of specific factors that affect the cost of your premium.

25. Type of Vehicle The amount of your premium will vary according to the make, model, and year of the vehicle you drive. Premiums are higher for cars that are known to break down or get stolen often. How a vehicle is used also affects the cost.

26. Location The area where you live has an affect on your insurance premium. If you live in an area with a high crime rate, your premium will be higher than in areas with a lower crime rate. City drivers usually pay more than drivers in rural areas because there is a greater likelihood of accidents in the city.

27. Driver Classification Drivers under the age of 25 or over the age of 70 have accidents more often so they pay more in insurance premiums. Middle-aged drivers with families are generally considered less of a risk.

28. Driving Record Drivers with a record of accidents or traffic violations pay the most in premiums, because they pose the greatest risk.

29. Driving Record Younger drivers have a problem because they usually haven’t been driving long enough to establish a good driving record.

30. Driving Record You can qualify for a lower premium if you complete a driver education course or have good grades.

31. Figure 33.1 TYPES OF VEHICLE INSURANCE COVERAGE The kinds of vehicle insurance coverage listed here are often included in a single policy or package policy. Which types cover injuries, and which types cover only property damage?

32. Graphic Organizer Graphic Organizer Automobile Liability Insurance Coverage 100 / 300 / 50 Indicates $100,000 limit that will be paid to one person in an accident. Indicates $300,000 limit that will be paid to all persons in an accident. Indicates $50,000 limit for payment for damage to the property of others. Property Damage Liability Bodily Injury Liability

33. Why do you think teenagers’ vehicle insurance is expensive? continued

34. Should there be a law to improve the safety of teenage drivers? continued

35. Has your state adopted a version of the Graduated Drivers License Law?

36. Figure 33.2 SPECIFICS OF AN INSURANCE POLICY The amount of coverage you want and the amount of your deductible determines the basic cost of your premium. If the policyholder has a claim under comprehensive coverage, how much must he or she pay before the insurance company pays? How much must the policyholder pay first in case of a collision?

37. Bodily Injury Liability For 100/300 bodily injury coverage, the insurance pays up to $100,000 for injuries to one person. For one accident, it pays up to $300,000 for all claims.

38. Fast Review • What is the difference between a financial responsibility law and a compulsory insurance law? • What can happen if you can’t show proof of financial responsibility or insurance? continued

39. Fast Review • What does liability insurance cover? • What is the maximum amount an insurance company will cover in damages to a vehicle? • What types of losses will comprehensive insurance cover? continued

40. Fast Review • How does a deductible affect the cost of a premium? • How can younger drivers qualify for lower premiums?