Auto Insurance

1
Auto Insurance

• Financial Planning Mr. Yates

2
Objectives

• Why do auto insurance rates differ among
  applicants of similar age?
• Define risk factors used to determine rates by
  insurance companies.
• Evaluate insurance application information from
  an underwriters perspective?
• Make recommendations for how to reduce auto
  insurance premiums.
• Why do I pay more than my friends?

3
Why do I pay more?

• If you have automobile insurance you may be at a
  loss to explain the discrepancy between insurance
  costs for your own coverage and other students
  you know.
• Although you may have some idea what leads to
  higher premium payments (such as a drunk driving
  arrest on a drivers record), you will probably
  be surprised to learn about the host of criteria
  insurers use in making underwriting decisions.

4
Why do I pay more?

• You will be pleased to learn that many factors
  affecting the cost of your insurance are under
  your control and that discounts can be earned for
  specific behaviors (such as avoiding traffic
  violations and getting a "good student discount.

5
Auto Insurance Varies

• Insurance companies use the personal information
  they collect from clients to help them place
  individuals into certain risk groups or
  statistical categories.
• Do you think teenagers should be considered a
  high-risk group? Why or why not? Explain.

6
Lets take the quiz!

• Teen Driving Statistics Quiz (on my website)
• Take the quiz and well go over the answers!

7
Quiz Answers

• Answers 1. C 2. C 3. B 4. C 5. A 6. C

These statistics seem to reflect poorly on teen
drivers. However, facts and figures are not a
personal reflection on every teen's judgment.
Simply being a teenager does not mean that you
are irresponsible or that you personally are
reckless driver. What do these statistics mean?
8
Teen Driving Statistics

• Teens have the lowest seat belt use rate of all
  drivers.This rate becomes worse when there are
  other teens in the car.
• During the first year of licensed driving, 1-in-5
  male and about 1-in-10 female 16-year old drivers
  will have a crash.
• Males are more than twice as likely to have
  serious crashes as females. But while the crash
  total for males has been declining over the past
  20 years, the total for females has been rising.

9
More Teen Driving Stats

• Teens are involved in three times as many fatal
  crashes as other drivers.
• 65 of all teen passenger deaths occur when
  another teen is driving.
• Car crashes are the 1 cause of death for 15 to
  20-year olds.
• More than any age group, teens are likely to be
  involved in a single-vehicle crash.

10
Requirements

• Let's take a look at the kinds of information an
  insurance company requires in order to determine
• A) whether or not to provide insurance to an
  individual, and
• B) how much the company will charge in order to
  provide insurance protection

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Auto insurance provides six primary types of
protection summarized in the table below
Auto Insurance Coverage Applies to Applies to
Bodily Injury Coverage Policyholder Other Persons
Bodily injury liability No ?
Medical payments ? ?
Protection against uninsured motorists ? ?
Property Damage Coverage Policyholders Automobile Property of Others
Property damage liability No ?
Comprehensive physical damage ? No
Collision ? No
12
Definitions Continued

• Medical Payments pay for hospital and treatment
  costs for injuries that you, members of your
  immediate family, or relatives living with you
  suffer in an automobile accident, regardless of
  fault. It covers family members whether they are
  riding in your car or someone elses or if they
  are struck by a car while walking. It also covers
  any passengers in your car.
• Comprehensive Physical Damage pays for damage to
  your car except when caused by a collision. It
  protects your car against fire, theft, glass
  breakage, flood, falling objects, missiles,
  explosions, earthquake, windstorm, hail, water,
  vandalism or malicious mischief, riot or civil
  commotion, and collision with a bird or animal.
• Collision pays for the repair or replacement of
  your car after an accident.

13
Definitions of Basic Auto Insurance Coverage

• Bodily Injury and Property Damage Liability pays
  for bodily injuries to other people or damage to
  their property, if you are liable. Pays whether
  your car is driven by you, a qualified family
  member, or another driver using your permission.
  In most cases, protects you in a car you borrow
  or rent temporarily.
• Uninsured or Underinsured Motorist Liability pays
  for bodily injuries to you, qualified family
  members, and any other person occupying your
  covered auto, caused by an uninsured or
  underinsured motorist or a hit-and -run driver,
  if that driver is liable.

14
Insurance Factors

• Type of Vehicle (station wagon, van, sport
  utility vehicle, sedan), including the make,
  model, and manufacturer
• Vehicle performance capabilities, including
  changes made to the vehicle after the original
  purchase from manufacturers outlet
• Type of use of vehicle (leisure, commute,
  business, farm, commute mileage, etc.)
• Vehicle characteristics, including engine size,
  safety and protective devices, damageability,
  repair ability, and theft deterrent devices
• Percentage use of the vehicle by the primary
  driver
• Number of vehicles used by people living in
  household
• Academic standing of the primary driver
• Completion of driver training or defensive
  driving courses by the primary driver
• Gender of the primary driver
• Marital status of the primary driver
• Status as a Smoker or Non-smoker
• Number of other policies owned with the insurance
  company.
• The ZIP code where the vehicle is garaged or kept.

15
Anti-Theft

• A number of anti-theft devices are available in
  the market place, which can bring down your
  insurance rates!
• Alarms
• Club-like devices attached to the steering wheel.
• Another device is a big, hinged collar designed
  to cover the ignition lock cylinder.
• The boot. The driver, once again, must apply the
  device to the tire and wheel in order to prevent
  a thief from driving away.
• Tracking devices. Hidden transmitters send out
  signals to police departments, which enable the
  car to be located when reported stolen. With
  these devices, the driver must notify the police.
  The time delay in reporting benefits the thief,
  particularly if the thief intends to sell the car
  for its parts.

16
Auto Insurance Assignment 1

• FP Auto Insurance Worksheet 3
• Complete on your own.

17
Auto Insurance Project / Assignment

• Using the internet, obtain an insurance quote for
  yourself for auto insurance. If you do not have
  a car, please choose a realistic car for yourself
  and use this information to complete the online
  form. Use the following website,
  http//secure1.insweb.com/
• It will give you an online application to fill
  out and submit. It will get quotes from many
  different insurance companies for you. When they
  ask for your address and other personal
  information, accurately provide your email
  address and request that the info. be sent via
  email. If I were you, I would consider putting a
  fake street name in the address line. That will
  protect you from receiving junk mail at your
  residence.
• Each email should be printed up as a quote.
  You'll need three of them.
• You can also access individual websites to obtain
  your quotes. It is up to you.