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Auto Insurance

Auto Insurance

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Published by: hatanolove on Jun 28, 2008
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What you will learn during the course Welcome to FIN 3360/6360

• • • • • Auto Insurance Homeowners Insurance Health Insurance Life Insurance Structure of Insurance Industry

Risk and Insurance

State Farm Auto Insurance Policy
• • • •

Declarations Page
Identifies Insured Describes Coverage Policy Period: 8/24/07 - 2/23/08 Premium: $435.08


• Average auto liability insurance premium - $391.24 • Average auto collision insurance premium - $391.24 • Average auto comprehensive insurance premium - $263.64 • Average auto combined insurance premium - $765.20

A) Bodily Injury Liability $100,000 Each Person $300,000 Each Accident Property Damage Liability $100,000 Each Accident This coverage is often described as: 100/300/100

Minimum Limits in California
• Bodily Injury $15,000 for death or injury of any one person, any one accident. $30,000 for all persons in any one accident. • Property Damage $5,000 for any one accident.

Four Ways to Accomplish Financial Responsibility in California
• Coverage by a motor vehicle or automobile liability insurance policy; • A cash deposit of $35,000 with the Department of Motor Vehicles (DMV); • A certificate of self-insurance issued by DMV to owners of fleets of more than 25 vehicles; or • A surety bond for $35,000 obtained from an insurance company licensed to do business in California.


Driver Responsibility in California
• All California drivers and owners must have at least the statutory limits of minimum liability insurance or an approved alternative way to pay for injury or property damage they may cause. Penalties are very severe for non-compliance with this section of the vehicle code.

Coverage (Continued)
C) Medical Payments $25,000 Each Person D) Comprehensive G 100) $100 Deductible Collision H) Emergency Road Service

Coverage (Continued)
U) Uninsured Motor Vehicle $100,000 Each Person $300,000 Each Accident W) Underinsured Motor Vehicle $100,000 Each Person $300,000 Each Accident

Car Policy

• Your use of your car



When and Where Coverage Applies
• When - Policy Period shown on the declarations page • Where - in the U.S., its territories and possessions or Canada and (for liability, medical payments and physical damage coverage only) in Mexico within 50 miles of the U.S border

• You or Your - means the named insured shown on the declarations page • Your Car - means the car or the vehicle described on the declarations page

Section I - Liability
• Pays damages which an insured becomes legally liable to pay because of bodily injury to others and damage to property and defends any suit against an insured • • • •

Liability - Additional Coverages
Court costs Interest on damages Premiums or costs of bonds Expenses incurred by an insured
– Wages up to $100 per day – First aid at the accident – At their request


Liability Exclusions
• While charging persons for a ride • For bodily injury to a family member • For damage to property owned by, rented to or in the charge of or transported by an insured • For liability assumed by the insured under any contract or agreement

Liability - Example
• While driving your car, you run into another car. The accident is your fault and it costs $7,500 to repair the other car.

Liability - Example

Medical Payments
• Pays reasonable medical expenses for accidental bodily injury that occurs to you while occupying a vehicle covered under the liability section or as a pedestrian if struck by a motor vehicle or trailer

• Same accident as before, but you also injure the driver of the other car. He incurs $30,000 in medical bills. He sues you and is awarded $120,000 for bodily injury.


Medical Payments - Example


• Same accident as before, except you are injured and incur $28,000 in medical bills.

• Occupying - means in, on, entering or alighting from

Medical Payments - Example
While getting out of your car, you trip on the curb and break your ankle. Your medical bills are $4,000.

Answers to Examples
• Property Damage Liability - Your policy pays $7,500. • Bodily Injury Liability - Your policy pays $100,000. • Medical Payments, first example - Your policy pays $25,000. • Medical Payments, second example - Your policy pays $4,000.



Comprehensive Collision Emergency Road Service

Pays for loss to your car except by collision Includes breakage of glass and loss caused by: • Missiles • Falling objects • Fire • Theft or larceny • Explosion

• • • • • •

Earthquake Windstorm Hail Water Flood Malicious mischief or vandalism • Riot or civil commotion • Hitting or being hit by bird or animal

Comprehensive - Example Comprehensive - Example
Someone scratches the paint on your car with a tool. It costs $2500 to sand and paint your car to repair the damage. A B C D 0 2400 2500 None of the above


Comprehensive Transportation Costs
Provides up to $25 per day in transportation costs if your car is stolen after you report the loss and ending when they offer to pay the loss

Comprehensive Transportation Costs - Example
Your car is stolen. You immediately report the loss and rent a replacement for $40 per day. Six days later State Farm settles your claim.

Comprehensive Transportation Costs - Example
A B C D E 0 64 80 96 None of the above

Pays for loss to your car caused by collision but only for the amount of each such loss in excess of the deductible.


Collision - Example Definition
Your car is parked at Marketplace while you are shopping. When you return to your car, the rear fender is smashed. You can’t find out who ran into your car. It costs $700 to repair the damage.

Collision - means your car upset or hit or was hit by a vehicle or other object.

Collision - Example
A B C D 0 600 700 None of the above

Clothes and Luggage Comprehensive and Collision
Pays up to $200 in excess of the deductible for loss to your clothes and luggage if they were in the car at the time of the loss.


Clothes and Luggage Comprehensive
Loss must be caused by: • Fire • Lightning • Flood • Falling objects • Explosion • Earthquake • Theft of the entire car

Clothes and Luggage - Example
You decide to drive to Los Angeles for the weekend. While your car is parked at the Speedway, someone breaks into your car and steals your luggage, which contained your clothes. The luggage was worth $100 and the clothes were worth $200.

Clothes and Luggage - Example
A B C D E 0 100 200 300 None of the above

Limits of Liability Comprehensive and Collision
The limit of liability is the lower of: • actual cash value • the cost of repair or replacement


Emergency Road Service
Pays the cost you incur for: • up to 1 hour of labor costs at site of breakdown • towing to nearest repair location • towing out if stuck on or next to public highway • delivery of gas, oil, loaned battery or change of tire - does not pay for the cost of these items

Emergency Road Service Example
While driving you get a flat tire. When you discover you don’t have a spare, you call a service station for help. They bring you a new tire and put it on your car. They charge $100 for the new tire and $25 for changing your tire.

Emergency Road Service Example
A B C D E 0 25 100 125 None of the above

Uninsured Motor Vehicle Coverage Underinsured Motor Vehicle Coverage


Uninsured Motor Vehicle
Pays damages for accidental bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle

Definition of Uninsured Motor Vehicle
• A motor vehicle without insurance, with insurance limits below the legally required limits in your state, or if the insurer denies coverage or becomes insolvent • A “hit-and-run” motor vehicle whose owner or driver is unknown which strikes the insured or the vehicle the insured is occupying

Deciding Fault and Amount
• Whether the insured is legally entitled to collect damages and, if so, the amount must be decided by agreement between the insured and State Farm • If there is no agreement, these questions will be settled by arbitration

Uninsured Motor Vehicle Example
You are driving your car when you are hit from behind by an uninsured driver. You are injured and taken to the hospital for treatment. You incur $5,000 in medical bills. You would be entitled to a bodily injury award of $15,000 if the other driver had been insured.


Uninsured Motor Vehicle Example
A B C D E 0 5,000 15,000 20,000 None of the above

Underinsured Motor Vehicle
Same as Uninsured Motor Vehicle except this applies if the at fault driver has bodily injury limits less than your Uninsured Motor Vehicle coverage (100/300)

Underinsured Motor Vehicle Example
As a pedestrian you are hit by a driver with 20/40 bodily injury limits. You are entitled to a $50,000 bodily injury award. A B C D E

Underinsured Motor Vehicle Example
0 20,000 30,000 50,000 None of the above


How Do Medical Payments and Uninsured/Underinsured Motor Vehicle Coverages Combine?
4. “The uninsured motor vehicle coverage shall be excess over and shall not pay again any medical expenses paid under the medical payments coverage.” Page 13

Medical Payments and Uninsured Motor Vehicle Example
An uninsured driver going the wrong way on a one way street hits you while you are in your car. You incur $25,000 in medical bills and $20,000 in lost wages. You would be entitled to a bodily injury award of $110,000 if the driver had been insured.

Medical Payments and Uninsured Motor Vehicle - Example
A B C D E 0 25,000 100,000 110,000 None of the above

Medical Payments and Uninsured Motor Vehicle - Example
Bodily Injury Award consists of: 25,000 medical expenses 20,000 lost wages 65,000 pain-and-suffering 110,000 total State Farm pays 25,000 under Medical Payments 85,000 under Uninsured Motor Vehicle 110,000 total


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