Chapter 11

Insurance

Concept of Insurance

• $500/year homeowner’s policy will pay $1000 house or $500,000 lawsuit– Relatively small amount compared to a large

financial loss

Types of Insurance

• Homeowners

• Life

• Health

• Renters

• Dental

• Car

Financial Responsibility

• In NC, you are required to prove financial responsibility in order to legally operate a motor vehicle

Financial Responsibility Proof

• Post a cash bond (in effect, self insuring you and your company)

• Buy liability insurance

Personal Injury Liability

• Owner/driver against having to pay for injuries they caused to others– $60,000 per accident is minimum in NC

• This is not adequate if someone is seriously hurt

100/300 or 300/300 might be a better choice

Property Damage Liability

• Damage you do to another’s property – Car, house, yard, mailbox – Minimum $25,000 in NC (for about $4 more

per year $50,000

DL 123 Form

• Filled out by insurance agent proving of liability coverage

Collision Coverage Insurance

• Protects your car when you are at fault– Will pay up to book value of your car– For a lower premium, deductibles are

available- $250 up to $1000- deductible is what you pay first

– Collision is required if you lease or borrow money

Comprehensive Insurance

• Repairs your vehicle form “acts of God”, theft, vandalism, deer damaging car– Required for loan or lease – Will pay up to value of car

Medical Payments Insurance

• Pays for you and your passengers medical bills– $10,000 is currently the max in NC– Pays for minor injuries, ER, ambulance

Uninsured Motorist Insurance

• Owner/driver against another driver, at fault, not having any insurance– Your company will pay for your car and

injuries up to limit of the policy

Underinsured Motorist Insurance

• Protects the owner/driver in the event the other driver (at fault) has insurance but not enough to cover– Your company pays what theirs does not up

to limit of policy

Towing Insurance

• Pays if it is necessary to tow your car after a wreck or breakdown– Max is $50 and does not cover if car is

illegally parked

Rental Reimbursement Coverage

• Pays for a rental while yours is being repaired under collision coverage– Not required

No Fault Insurance

• NC does not have

• But if you run into someone from a state with this coverage, their company will pay if their policy holder is at fault

Rental Car Coverage

• If you rent a car, your comprehensive and collision on your car will cover the rental at no extra charge

Insurance Points used for Rates

• 1 pt is 15%• 2 pts is 40% • 3 pts is 65%• 4 pts is 90%• 5 pts is 120% • 6 pts is 150%• 7pts is 180%Passing a stopped school bus is 120% increase on

your premiums

Insurance Rate Factors

• Driving rate• What the vehicle is used for • Where you live and drive• Driving experience (inexperience 150% 1st two

year and 100% third year)• More than one car you get 20%discount• The amount of coverage • Type of vehicle insured• Being a high risk driver

In NC, insurance are not based on:

Age

Gender

Marital status

Grades

Driver education

Color of vehicle

Rates are based on:

• Pleasure use only

• To work > 10 miles

• To work < 10 miles plus 20%

• For business +25%

• Farm use ----25%

Inexperience driver

• 150% for the first to years

• 100% the third year

• After three years experience the rates return to normal

Assigned Risk Facility

• 23% of NC drivers are insured through the reinsurance facility– Pay a third more for insurance– The only way out is to convince an insurance

agent that you are no longer a risk

Recoup Surcharge

• Pay for losses in the reinsurance facility

• Each year all the premiums paid in and the judgments paid out must equal

when high risk drivers cause more damage than their premiums can cover, the rest of the policyholders in NC have to make up the difference

Insurance Points Waivers

• In NC, a less than 10 MPH over the speed limit ( 2 points) is no insurance points for the first offense in 3 years. A second violation results in revoking the waiver and receiving both violation points– Also allow a prayer for judgment once in 3

years

Insurance Rates Increase for 2 pts

• Increase premiums by 40% for three years – So a 10 MPH over ticket will cost you $300 in

insurance premiums over the next 3 years

Insurance Rates for DWI

• 12 insurance points – $300/year to about $2800/year for three years– Comprehensive and collision are even more