VEHICLE INSURANCE

Why It’s ImportantWhy 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.

Types of Vehicle InsuranceTypes 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.

Types of Vehicle InsuranceTypes of Vehicle Insurance The company that issues the policy is called the insurer.

The buyer of the policy is called the policyholder.

Types of Vehicle InsuranceTypes of Vehicle Insurance The six types of vehicle insurance protection are:

• Bodily injury liability • Property damage liability• Medical payments

continued

Types of Vehicle InsuranceTypes of Vehicle Insurance

• Collision• Comprehensive coverage• Uninsured Motorist• Miscellaneous coverage

Figure33.1 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?

Types of Vehicle InsuranceTypes of Vehicle Insurance Liability insurance protects you from claims of injury or property damage to others in case you’re held responsible for an accident.

Bodily Injury LiabilityBodily Injury Liability Bodily injury liability insurance covers injuries to someone else.

Bodily Injury LiabilityBodily 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.

Property Damage LiabilityProperty Damage Liability Property damage liability insurance covers damage to another person’s vehicle or other property.

It also covers damage to property, such as telephone poles or street signs.

Collision InsuranceCollision Insurance Collision insurance covers damages to your own vehicle.

Collision InsuranceCollision Insurance The maximum amount covered is based on the actual 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.

Medical Payments CoverageMedical Payments Coverage Medical payments coverage is also called personal injury protection.

It covers injuries to you and anyone else in your car.

Comprehensive CoverageComprehensive Coverage Comprehensive insurance covers damage to a policyholder’s vehicle caused by things other than a car accident.

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

Comprehensive CoverageComprehensive Coverage Like collision coverage, comprehensive coverage will not cover more than the actual cash value of your car.

Uninsured MotoristUninsured MotoristUninsured motorist coverage protects you from people who can’t pay insurance claims.

Most states require this coverage.

Miscellaneous CoverageMiscellaneous Coverage Other things insurance will cover are:

• Rental cars• Towing expenses• Additional drivers• Motorcycles• Snowmobiles

Graphic OrganizerAutomobile LiabilityAutomobile LiabilityInsurance CoverageInsurance Coverage

Graphic OrganizerGraphic Organizer

Indicates $100,000limit that will bepaid to one personin an accident.

Indicates $100,000limit that will bepaid to one personin an accident.

Indicates $50,000limit for paymentfor damage to theproperty of others.

Indicates $50,000limit for paymentfor damage to theproperty of others.

Indicates $300,000limit that will bepaid to all personsin an accident.

Indicates $300,000limit that will bepaid to all personsin an accident.

100 / 300 / 50

Bodily Injury Liability Property DamageLiability

Financial Responsibility LawFinancial 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.

Compulsory Insurance LawCompulsory Insurance Law A compulsory insurance law legally requires drivers to have a minimum amount of car insurance.

Compulsory Insurance LawCompulsory Insurance Law If you can’t show proof of insurance, you can have your license or registration taken away from you.

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

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

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

Figure33.2 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?

Insurance PremiumsInsurance Premiums The amount an insurance company charges a policyholder for an insurance policy is called the premium.

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

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

DeductibleDeductible A deductible makes you responsible for small losses and the insurance helps pay for the larger losses.

Factors Affecting the Factors Affecting the Costs of Insurance Costs of Insurance

There are a variety of specific factors that affect the cost of your premium.

Type of VehicleType of Vehicle The amount of your premium will vary according to the make, model, and year of the vehicle you drive.

Type of VehicleType of Vehicle Premiums are higher for cars that are known to break down or get stolen often.

How a vehicle is used also affects the cost.

LocationLocation 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.

LocationLocation City drivers usually pay more than drivers in rural areas because there is a greater likelihood of accidents in the city.

Driver ClassificationDriver Classification Driver classification includes factors like your age, gender, and marital status.

Driver ClassificationDriver 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.

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

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

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