Vehicle Insurance

Vehicle Insurance

Chapter 33

Types of Vehicle Insurance Laws on Vehicle Insurance The Costs of Insurance

Basics

Bodily Injury Liability

Property Damage Liability

CollisionInsurance

MedicalPaymentsCoverage

Comprehensive Coverage

UninsuredMotorist

Protection

MiscellaneousCoverage

• Insurance – paid protection against losses due to injury/property damage

• Policy – contract between ins. co. and policyholder that explains amt./types of coverage• Insurer – issues policy• Policyholder – buyer of policy

• Liability insurance – most basic type of coverage; protects you from claims of injury/property damage to others


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Bodily Injury Liability ins. covers injuries to someone else.

• Stated in thousands of dollars• 1st figure -> injuries to one person• 2nd figure -> total for one accident• Example: 100/300 bodily injury: $100,000 for injuries to one person $300,000 for all claims


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Property Damage Liability ins. covers damage to another person’s vehicle/property (also covers telephone poles, signs, etc.)

• Policy might quote all liabilities together• Example 100/300/50 $100,000 for injuries to one person $300,000 for all claims $50,000 for property damage


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Collision insurance covers damages to your own vehicle

• Max. amt. covered based on actual cash value of your vehicle, which = orig. value – dep.

• Depreciation – decline in value of a vehicle because of use


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Medical payments coverage - also called personal injury protection

• Covers injuries to you or anyone else in your car

• Typical coverage: $5,000 -$10,000


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Comprehensive coverage covers damage to a policyholder’s vehicle caused by things other than a car accident

• Examples: falling objects, theft, flood damage, vandalism

• Will not cover more than the actual value of the car


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Uninsured motorist protection covers you from people who can’t pay insurance claims

• Anyone riding with you is also protected• If you’re hit by a vehicle while walking you are

also covered• Most states require this


Basics



CollisionInsurance



UninsuredMotorist

Protection


• Other types of protection:• Coverage for a rental car• Cost of towing• Coverage for others who use your car• Add a work vehicle to your policy• Motorcyclists, motor scooters,

snowmobiles insurance


FinancialResponsibilityLaw

CompulsoryInsuranceLaw

No-FaultInsurance

Laws • States have laws requiring drivers to show proof that they can pay for any injuries or damages they may cause

• Also protects you from other drivers• Laws vary state to state


Laws • Financial responsibility law – says you must pay for any damage/injury you cause in an accident either w/ ins., savings or by selling property

• If you can’t pay, you can be sued, lose your license or car



No-FaultInsurance


Laws • Compulsory insurance law – legally requires drivers to have a min. amt. of car ins.

• You must show proof of ins. before you can get a license/register your car

• Police also ask for ins. when you get pulled over



No-FaultInsurance


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location

DriverClassification

DrivingRecord

• The average annual car ins. cost: $1,200• Cost of ins. is directly affected by the amt.

insurers pay out in claims• Claim – a request for payment from an insurer

for any damages covered by a policy• The more they pay, the more we pay


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Premium – amt. an ins. co. charges a policyholder for a policy

• Premium covers policyholder for a period, usually a year, and then is renewed

• Insurer can cancel a policy or refuse coverage


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Deductible – an amount in damages a policyholder must pay before the ins. co. pays anything

• Makes you responsible for small losses and the insurer helps pay for the larger losses


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Factors that affect the cost of ins.:• Claims paid out• Amount of coverage• Amount of deductible• Type of vehicle• Vehicle usage• Geographic location• Age


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Premium will vary according to:• Make• Model• Year

• New cars and cars with expensive parts are more expensive to insure


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Where you live affects your premium• Area w/ high crime rate/vandalism/theft will

be higher• City drivers more expensive than rural


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Driver classification includes factors like:• Age• Gender• Marital Status

• <25, >70 have more accidents• Young men > young women


Costs

InsurancePremiums

Deductible

Factors

Type Of

Vehicle

Location


DrivingRecord

• Major factor: driving record• Accidents/traffic violations = higher premiums• Drivers education course/good grades = lower

premiums


Laws Required documentsYour insurance company must give you a New Jersey Insurance Identification Card for each vehicle under your policy.

You must keep the card in the vehicle and present it: Before an inspectionWhen involved in an accidentWhen stopped for a traffic violationWhen you are stopped in a spot check by a police officerFailure to present the card may result in fines.

Driving an uninsured vehicle may result in fines, community service, license suspension and insurance surcharges.



No-FaultInsurance

http://www.state.nj.us/mvc/Inspections/HowDoI.htm


Laws All vehicles registered in New Jersey require three types of mandatory insurance: Liability insurance pays others for damages that you cause if you are responsible for an accident. It does not cover medical expenses Personal injury protection (PIP) pays medical expenses if you or other persons covered under your policy are injured in an automobile accident. Often called No Fault coverage, it pays your medical expenses if you were or were not at faultUninsured motorist coverage protects you if you are in an accident with someone who doesn’t have proper insurance coverage .



No-FaultInsurance


Laws • No-fault insurance – law that requires drivers involved in accidents to collect damages from their own ins. Co. no matter who is at fault

• When there is a dispute about who is at fault



No-FaultInsurance


Laws Sue’s new car was stolen only five months after she bought it. It was never found. Since the car was insured for comprehensive coverage, Sue filed a claim for the purchase price of the automobile. The insurance company offered to pay her what they called the actual cash value of the car, which was considerably less than the amount Sue requested. Who is legally correct?



No-FaultInsurance

• Sue’s new car was stolen only five months after she bought it. It was never found. Since the car was insured for comprehensive coverage, Sue filed a claim for the purchase price of the automobile. The insurance company offered to pay her what they called the actual cash value of the car, which was considerably less than the amount Sue requested. Who is legally correct?

• Joe lost control of his car one night, crashed through the wall of a corner house and landed in the living room. No one was seriously hurt, but there was considerable property damage. What coverage does Joe need to pay the cost of the damage.

• Randy’s policy lapsed. While on vacation he ran a red light and permanently disabled the motorist in the other car.

• Is Randy in trouble?

• Karen has all six types of coverage on her 10 year old chevy. Should she drop any part of the coverage? And why?

• Wayne was furious because after moving to another state, his insurance premiums doubled. Wayne had never had an accident in his life, and he did not think this was fair. Can you explain why Wayne’s rates went up?

• Carolyn was comparing her auto policy with her neighbors. She could not understand why her premiums were so much higher than her neighbor’s since they had identical coverage from the same insurance company. What factors may have accounted for the difference in the costs of the two policies?

• Tyrone was sued by the Livingston Family because Mr. and Mrs. Livingston were injured in an accident which Tyrone caused. Tyrone’s liability coverage was 25/50/10. The court awarded Mr. Livingston $25,000 and Mrs. Livingston $10,000 for bodily injury. Was Tyrone’s coverage adequate to pay the costs?

Vehicle Insurance

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