car insurance
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1
Car Insurance
(about 178 slides)
How insurance works
2
You pay a little money
How insurance works
3
You pay a little money
If you don’t have an accident, the insurance
company keeps your money
How insurance works
4
You pay a little money
If you do have an accident, the insurance
company pays a lot
How insurance works
5
You pay a little money
They will pay up to the limit of your policy
How insurance works
6
You pay a little money
If you purchased a $15,000 policy, they will
pay up to $15,000
$15,000
How insurance works
7
You pay a little money
If you purchased a $100,000 policy, they will
pay up to $100,000
$100,000
How insurance works
8
The money you pay is called the “premium”
How insurance works
9
You might pay every month,or every three months,
or every six months(you decide)
How insurance works
10
You might pay every month,or every three months,
or every six months(you decide)
(Paying ahead is a little cheaper)
How insurance works
11
You pay a premium
If you don’t have an accident, the insurance
company keeps your premium
How insurance works
12
You pay a premium
If you don’t have an accident, the insurance
company keeps your premium
504 months and counting
Car insurance is not one
thing.
It comes in pieces.
You don’t have to buy all the
pieces.
13
Like going to the HomeTown
buffet, when you buy car
insurance, you don’t have to
buy everything
14
Car insurance has 7 parts7 premiums7 policy limits
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You don’thave to buyall 7 parts.
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In California, only 2 parts are required
by law.
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7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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Required in California
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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What Liability is
– This is an example of baby talk.
Some teenagers say, “It really wasn’t my fault. It was just an accident.”
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What Liability is
• In the grown-up world we have the idea of negligence.
• You are negligent if you should have been more careful.
• It’s your fault if you are negligent.• Now you have to pay for what you did. It’s
your fault. Crying won’t help. You are liable.
Two parts of car insurance are required by the state of
California.
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7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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Bodily Injury Liability InsuranceYou hurt another person’s body.
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Bodily Injury Liability InsuranceYou will have to pay all their medical bills.
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Bodily Injury Liability InsuranceYou will have to pay all their medical bills or, if
you have Bodily Injury Liability car insurance, the insurance company will pay (up to the limit of your policy).
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Bodily Injury Liability• You hurt another person’s body• You have to pay for their injuries
because it was your fault—you are “liable”
For example, you drive into someone who is walking in a crosswalk and break their leg
Bodily Injury Liability
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You need Bodily Injury Liability insurance to pay the cost of their medical bills, pain and suffering.
Bodily Injury Liability
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You need Bodily Injury Liability insurance to pay the cost of their medical bills, pain and suffering.
You paid a small premium
Your insurance company will pay for their medical bills,
pain and suffering (up to the limit of your policy)
$15,000
Bodily Injury Liability
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REQUIRED!
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Bodily Injury Liability
• Required by the state of California• You must buy Bodily Injury Liability
insurance – You must buy at least $15,000 of BI in case
you hurt one person in an accident– You must also buy at least $30,000 of BI in
case you hurt more than one person in an accident
– This is called 15/30 BI insurance
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Bodily Injury Liability
What if you have $15,000 of Bodily Injury Liability insurance but the other person’s medical bills come to $265,000?
$265,000 damage
$15,000 of bodily injury insurance
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Bodily Injury Liability
What if you have $15,000 of Bodily Injury Liability insurance but the other person’s medical bills come to $265,000?
You pay the remaining $250,000.
$265,000 damage
$15,000 of bodily injury insurance
$250,000 paid by you
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Bodily Injury LiabilityPerhaps your parents will have
to sell their house to get the money to pay.
$265,000 damage
$15,000 of bodily injury insurance
$250,000 paid by you
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Bodily Injury LiabilityBuy lots of Bodily Injury Liability
insurance!
$265,000 damage
$265,000 of bodily injury insurance
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Bodily Injury Liability
• Are you covered by BI insurance?– You smash into another car and the other
driver’s head is hurt
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Bodily Injury Liability
• Are you covered by BI insurance?– You smash into another car and the other
driver’s head is hurt
Yes, they are hurt and it’s your fault
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Bodily Injury Liability
• Are you covered by BI insurance?– You hit a dog and break it’s leg
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Bodily Injury Liability
• Are you covered by BI insurance?– You hit a dog and break it’s leg
No, dogs are not people
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Bodily Injury Liability
• Are you covered by BI insurance?– You skid off the road and crack your head on
the driver’s window
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Bodily Injury Liability
• Are you covered by BI insurance?– You skid off the road and crack your head on
the driver’s window
No, BI covers other people you hurt, not you
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Bodily Injury Liability
• Are you covered by BI insurance?– You run into a telephone pole and your
passenger, a friend of yours, gets a gash on their forearm.
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Bodily Injury Liability
• Are you covered by BI insurance?– You run into a telephone pole and your
passenger, a friend of yours, gets a gash on their forearm.
Yes, they are hurt; it’s your fault.
Note: if your passenger is a member of your household, they would probably NOT be covered by BI insurance.
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7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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Property Damage LiabilityYou damage another person’s property. For
example, their fence.
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Property Damage Liability
• You damage another person’s property
• You have to pay for the damage because it was your fault—you are “liable”– For example, you crash into someone’s car
damaging their car.
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Property Damage Liability
You need Property Damage Liability insurance to cover the cost of repairing or replacing their property.
You paid a small premium
Your insurance company will pay to repair or replace their property
(up to the limit of your policy)
$5,000
Property Damage Liability
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REQUIRED!
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Property Damage Liability
• Required by the state of California• You must buy Property Damage Liability
insurance – You must buy at least $5,000 of PD in case
you damage another person’s property
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Property Damage Liability
What if you have $5,000 of Property Damage Liability insurance but the other person’s car repair bills come to $15,000?
$15,000 damage
$5,000 of property damage
insurance
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Property Damage Liability
What if you have $5,000 of Property Damage Liability insurance but the other person’s car repair bills come to $15,000?
You pay the remaining $10,000
$15,000 damage
$5,000 of property damage
insurance
$10,000 paid by you
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Property Damage Liability
You pay the remaining $10,000
What if you don’t have $10,000?
$15,000 damage
$5,000 of property damage
insurance
$10,000 paid by you
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Property Damage Liability
You pay the remaining $10,000
What if you don’t have $10,000?
$15,000 damage
$5,000 of property damage
insurance
$10,000 paid by you
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Property Damage Liability
You pay the remaining $10,000
What if you don’t have $10,000?
$15,000 damage
$5,000 of property damage
insurance
$10,000 paid by you
Future wages garnished.
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Liability Insurance, in general
Minimum required Bodily Injury Liability and Property Damage Liability is often referred to as: 15/30/5 insurance
$15,000 for hurting one person in an accident$30,000 for hurting all the people in an accident$5,000 for Property Damage
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Property Damage Liability
• Are you covered by PD insurance?– You skid off the road and crash into a wooden
fence
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Property Damage Liability
• Are you covered by PD insurance?– You skid off the road and crash into a wooden
fence
Yes, you damaged someone else’s property—their fence. Your Property Damage Liability insurance will pay to repair the fence.
58
Property Damage Liability
• Are you covered by PD insurance?– You are driving under the speed limit. A dog
runs into the street and you hit it. The dog is hurt.
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Property Damage Liability
• Are you covered by PD insurance?– You are driving under the speed limit. A dog
runs into the street and you hit it. The dog is hurt.
No, you are not at fault. Dogs are required by law to be under the control of their owners at all times. You are not liable. You do not have to pay the medical bills for the dog.
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Property Damage Liability
• Are you covered by PD insurance?– You crash into the car in front of you. No one
is hurt.
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Property Damage Liability
• Are you covered by PD insurance?– You crash into the car in front of you. No one
is hurt.
Yes, you damaged someone else’s property—their car. Your Property Damage Liability insurance will pay to repair the other person’s car.
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Property Damage Liability
• Are you covered by PD insurance?– You skid off the road and roll into small pond.
Your car has $2,000 of damage.
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Property Damage Liability
• Are you covered by PD insurance?– You skid off the road and roll into small pond.
Your car has $2,000 of damage.
No, you damaged your own property—not someone else’s. Property Damage Liability only pays for other people’s property.
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7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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Collision insurance
Your car is damaged in a crash or “upset”
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“Collision”
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“Upset”
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Collision• Pays to have YOUR car
repaired.
• Collision coverage will repair or replace your car up to value of your car– For example: You crash your car into a brick
wall. It will take $10,000 to repair your car. Your car is only worth $6,000. The insurance company will only pay you $6,000 to replace your car.
CollisionWill only pay for
repairing your car if the cost of repair is less than the value of your car.
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Collision will not pay $4,000 to repair a car that is only worth $200.
Collision insurance
How do people know the value of your car?
70
“Kelly Blue Book”
www.kbb.com
71
Collision insurance• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
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Collision insurance• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
You paid a small premium
Your insurance company will pay to repair or replace your car (up to
the value of your car)
Value of your car
You pay the deductible
73
Collision insurance• Has a “deductible”
– A typical deductible might be $500 or $1000
You paid a small premium
Your insurance company will pay to repair or replace your car (up to
the value of your car)
Value of your car
You pay the deductible
74
Collision insurance• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
$2000 damage
– For example: You have $2000 of collision damage and a $500 deductible collision insurance policy.
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Collision insurance• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
– For example: You have $2000 of collision damage and a $500 deductible collision insurance policy. You will pay $500 and the insurance company will pay the remaining $1,500
$2000 damage
$500 deductible paid
by you
$1500 paid by insurance company
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Collision insurance• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
– For example: You have $600 of collision damage and a $500 deductible collision insurance policy.
$600 damage
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Collision• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
– For example: You have $600 of collision damage and a $500 deductible collision insurance policy. You will pay $500 and the insurance company will pay the remaining $100
$600 damage
$500 deductible paid
by you
$100 paid by insurance company
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Collision• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
– For example: You have $400 of collision damage and a $500 deductible collision insurance policy.
$400 damage
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Collision• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
– For example: You have $400 of collision damage and a $500 deductible collision insurance policy. You will pay $400 and the insurance company will pay nothing.
$400 damage
$400 deductible paid
by you
Collision
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OPTIONAL
Collision is expensive
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This part of car insurance is often the most expensive part.
$
Collision is expensive
82
Cost of insurance depends on your car.
$
Collision is expensive
83
Cost of insurance depends on your car.
$
Collision is expensive
84
You can reduce your premium by increasing your deductible.
Collision is expensive
85
You can reduce your premium by increasing your deductible.
Premium
$500 deductible
Premium
$1000 deductible
Car Value Car Value
Collision is expensive
86
If you have a older car that you’re not making payments on, you may consider not buying this insurance at all.
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Collision insurance
Collision is NOT required by the state of California
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Collision insurance
• Are you covered by Collision insurance?– A tree falls on your car while parked in a
parking lot.
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Collision insurance
• Are you covered by Collision insurance?– A tree falls on your car while parked in a
parking lot.
No, you were not in a collision—you did not run into anything.
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Collision insurance
• Are you covered by Collision insurance?– You back into a fire hydrant and crumple your
bumper
91
Collision insurance
• Are you covered by Collision insurance?– You back into a fire hydrant and crumple your
bumper
Yes, you ran into something—it was a collision. Collision insurance will pay to repair your car.
92
Collision insurance
• Are you covered by Collision insurance?– A block of wood flies out of the pickup truck in
front of you and smashes into your windshield, cracking it
93
Collision insurance
• Are you covered by Collision insurance?– A block of wood flies out of the pickup truck in
front of you and smashes into your windshield, cracking it
No, this is not considered a collision. We’ll learn more about this situation in a moment.
94
Collision insurance
• Are you covered by Collision insurance?– You are speeding around a turn, lose control,
and your car flips over three times. Your car didn’t run into anything but has damage to the roof, hood, and doors.
95
Collision insurance
• Are you covered by Collision insurance?– You are speeding around a turn, lose control,
and your car flips over three times. Your car didn’t run into anything but has damage to the roof, hood, and doors.Yes, you were in an “upset” which is covered by your collision insurance.
96
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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Comprehensive insuranceYou car is damaged by anything except
collision or upset.
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Comprehensive• You car is damaged by
anything except collision or upset
• Comprehensive includes things like falling objects, floods, fire, hail, theft, vandalism, and colliding with an animal.
• NOT required by state of California
Hope they have “comprehensive” car insurance!
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Comprehensive• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
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Comprehensive• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
You paid a small premium
Your insurance company will pay to repair or replace your car (up to
the value of your car)
Value of your car
You pay the deductible
106
Comprehensive• Has a “deductible”
– You pay the deductible before the insurance begins to pay for the repair
– For example: You have $4,000 of comprehensive damage and a $1000 comprehensive deductible policy. You will pay $1000 and the insurance company will pay the remaining $3,000.
$4000 damage
$1000 deductible paid
by you
$3000 paid by insurance company
Comprehensive
107
OPTIONAL
Comprehensive
108
You can reduce your premium by increasing your deductible.
Comprehensive
109
You can reduce your premium by increasing your deductible.
Premium
$500 deductible
Premium
$1000 deductible
Car Value Car Value
Comprehensive
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Your comprehensive deductible should be the same as your collision deductible.
Premium
$500 deductible
Car Value
Premium
$500 deductible
Car Value
Collision Comprehensive
Comprehensive
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If you have a older car that you’re not making payments on, you may consider not buying this insurance at all.
112
Comprehensive insurance
• Are you covered by Comprehensive insurance?– Your car is stolen
113
Comprehensive insurance
• Are you covered by Comprehensive insurance?– Your car is stolen
Yes, Comprehensive insurance covers theft.
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Comprehensive insurance
• Are you covered by Comprehensive insurance?– You run over your garbage can and damage the
axle of your car.
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Comprehensive insurance
• Are you covered by Comprehensive insurance?– You run over your garbage can and damage the
axle of your car.
No, this is a collision, not a comprehensive loss.
116
Comprehensive insurance
• Are you covered by Comprehensive insurance?– A block of wood flies out of the pickup truck in front
of you and smashes into your windshield, cracking it
117
Comprehensive insurance
• Are you covered by Comprehensive insurance?– A block of wood flies out of the pickup truck in front
of you and smashes into your windshield, cracking it
Yes, Comprehensive covers falling objects.
118
Comprehensive insurance
• Are you covered by Comprehensive insurance?– You skid off the road and drive into small creek.
Your car has no dents but does have $2,000 of water damage.
119
Comprehensive insurance
• Are you covered by Comprehensive insurance?– You skid off the road and drive into small creek.
Your car has no dents but does have $2,000 of water damage.
Yes, Comprehensive covers flooding.
Insurance review
120
What type of insurance will pay?
You are driving too fast, skid off the road, and slide into a tree, denting the passenger door of your car. No one is hurt. You want your car repaired.
121
What type of insurance will pay?
A thief steals my car and the police chase him. The thief crashes my car into a brick wall. My car is a total loss. I want money to replace my car.
122
What type of insurance will pay?
My brother, who does not live in the same house as me, borrows my car to go to the store. He has my permission to drive it. At the store, while smoking crack cocaine in the car, he accidentally sets the car on fire. I need money for a new car.
123
What type of insurance will pay?
You are driving on a two lane country road. A truck, going the other way, kicks a rock up off the road cracking your windshield. You turn around, follow the truck and get it’s license plate. You want your windshield repaired or replaced.
124
What type of insurance will pay?
You are driving on a two lane country road. A truck, going the other way, kicks a rock up off the road cracking your windshield. You are not able to identify the truck. You want your windshield repaired or replaced.
125
What type of insurance will pay?
You are backing up in a parking lot and bump into a car that was waiting to take your parking place. Their car’s bumper is dented but your car seems fine. The owner of the other car wants their bumper repaired.
126
What type of insurance will pay?
A raccoon got into your car while your were camping. The raccoon tore up the seats in your car. You want the seats repaired or replaced.
127
What type of insurance will pay?
A kid threw a rock at your car and ran away. Now you have a big dent on the driver’s door. You want the dent repaired.
128
What type of insurance will pay?
A big wind came up while you were on the freeway and pushed your car. You tried to maintain control but swerved into the car that was passing you on the left. The other car ran off the road and flipped over. The driver was hurt. The other car’s driver wants money for their medical bills and to have their car repaired.
129
What type of insurance will pay?
A kid wants to cross the street and just runs out in front of your car. You hit the kid, knocking him to the ground. His wrist is hurt and he’s crying. His mother comes out of a house and takes him to the hospital. She wants you to pay for the emergency room treatment.
130
What is a “deductible” and which parts of auto insurance
have a “deductible”?
131
Now, quickly,the last 3 coverages…
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133
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
134
Medical Payments insurancePays for medical attention to anyone who is hurt
while in your car—even you.
135
Medical Payments• Pays for medical attention to
anyone who is hurt while in your car—even you.
– For example, pays for ambulance, surgery, hospital, even prosthetic devices and funeral expenses
• NOT required by the state of California
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Medical Payments insurance• Pays regardless of who was at fault• Even pays if you are not in a car at all—
even if you are just a pedestrian or are on a bicycle.
137
Medical Payments insurance
Only begins to pay after all other medical insurance you may have is exhausted.
(this idea is called “secondary” insurance. Medical Payments is an example of “secondary” insurance)
Medical Payments
138
OPTIONAL
139
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
140
Uninsured Motorist insurance
Pays if you or your passengers are physically hurt by an uninsured (or underinsured) driver
141
Uninsured Motorist insurance• You or your passengers are physically hurt
by an uninsured (or underinsured) driver• The other driver should have Bodily Injury
Liability insurance to cover your injuries.• Uninsured Motorist insurance covers what
the other driver should have, but may not.
Uninsured Motorist
142
OPTIONAL
143
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
144
Towing and Road Service insurance
145
Towing and Road Service insurance
• Your car won’t run and needs to be towed
• “Road Service” includes things like a tire change or a jump start or keys locked in car
Towing and Road Service
146
This part of car insurance is cheap.(less than $5 a month)You will lock your keys in the car.You will run out of gas.
Towing and Road Service
147
OPTIONAL
148
7 parts of car insurance
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
Car insurance has 7 parts7 premiums7 policy limits
149
One more thingabout insurance for carsbought on credit…
150
Gap Insurance
Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
• You take out a loan to buy a car
Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
• You take out a loan to buy a car• You have collision and
comprehensive insurance
Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
• You take out a loan to buy a car• You have collision and
comprehensive insurance• You total your car or your car is
stolen.
Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
• You take out a loan to buy a car• You have collision and
comprehensive insurance• You total your car or your car is
stolen.• The insurance company pays
you the current value of the car Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
• You take out a loan to buy a car• You have collision and
comprehensive insurance• You total your car or your car is
stolen.• The insurance company pays
you the current value of the car• You still have to pay off the loan
Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
• You take out a loan to buy a car• You have collision and
comprehensive insurance• You total your car or your car is
stolen.• The insurance company pays
you the current value of the car• You still have to pay off the loan• The current value of the car is
less than what you owe on the loan—you have a “gap”
Loan:$24,000
Car Value:$20,000
Gap
Gap Insurance
Avoid needing Gap Insurance 1:make a big down payment
Avoid needing Gap Insurance 1:make a big down payment
Avoid needing Gap Insurance 2:small down payment and short loan period
Avoid needing Gap Insurance 2:small down payment and short loan period
Avoid needing Gap Insurance 3:pay cash for your car
Avoid needing Gap Insurance 3:pay cash for your car
165
Review
These are the only two types of insurance required by the state of California:
166
Review
These are the only two types of insurance required by the state of California:–Bodily Injury Liability–Property Damage Liability
167
Review
This will pay for people you hurt:
168
Review
This will pay for people you hurt:–Bodily Injury Liability
169
Review
This will pay to repair or replace other people’s property that you damage:
170
Review
This will pay to repair or replace other people’s property that you damage:–Property Damage Liability
171
Review
These will pay for damage to your car:
172
Review
These will pay for damage to your car:
–Collision–Comprehensive
173
Review
These have a deductible—money you have to pay before the insurance company starts paying.
174
Review
These have a deductible—money you have to pay before the insurance company starts paying.–Collision–Comprehensive
175
Review
These will pay for damage to you:
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Review
These will pay for damage to you:–Medical Payments–Uninsured Motorist
177
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
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---end of presentation---
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