Car Insurance

1
Car Insurance

• Justine McAleese
• Rita Kamau

2
Elements of a Contract

• Must be an agreement based upon a definite offer
  by one party and the acceptance of that offer by
  the other party
• The two parties must be legally competent to make
  a contract
• There must be a consideration both parties must
  give something of value and both must receive
  something of value
• The contract must have a legal purpose

3
Insurance

• Indemnity Principle legal doctrine stating that
  the function of insurance is to repay (indemnity)
  insured's for their actual losses
• Insurable interest Insured must be in position
  to sustain financial loss in the event insured
  against occurs
• Loss measurement A way to determine the amount
  of payment when a loss occurs
• Car Insurance Market value
• Subrogation legal principle that provides that
  to the extent an insurer has paid for a loss, the
  insurer obtains the right of its policyholder to
  recover from any third party who caused the losses

4
Auto Accidents
Casual factors in Fatal Auto Accidents Factor Pe
rcent of Cases Improper driving 75.9 Speed too
fast 30.1 Right of way violation 14.1 Drove
left of center 10.5 Other improper
driving 21.2 No improper driving 24.1

• The time with the most fatal accidents is weekend
  nights between midnight and 3am.
• Fires occurred in .1 percent of all accidents but
  in 3 percent of fatal accidents.
• People ages 16-20 had the highest fatality and
  injury rates in car accidents per 100,000 people.
  
• 39 percent of fatal crashes involved alcohol.
  Between midnight and 3 in the morning the
  percentage rose to 76.

5
Premiums

• Classification System a method of establishing
  the price of individual insurance policies by
  classifying policyholders in groups-each of whose
  members have similar characteristics
• Factors that affect your premium
• Age
• Gender
• Marital Status
• Geography
• Driving Violations
• Vehicle Type
• Accident Claims
• Credit Rating
• Occupation
• Education
• Driving Distance to Work
• Miles Driven each year
• Years of driving experience
• Whether or not you currently have auto insurance
  and how high are your limits
• Theft protection devices (often results in
  discounts)
• Multiple cars and drivers (another opportunity
  for discounts)

6
Kinds and Amounts of Coverage

• Cost of insurance depends upon the kind and
  amounts that are purchased
• More coverages purchased and the higher the
  limits, the greater the cost
• Liability Limits Factor
• 25,000 1.00
• 50,000 1.13
• 100,000 1.22
• 500,000 1.48

7
Insurance fraud

• soft auto-insurance fraud
• filing more than one claim for a single injury
• filing claims for injuries not related to an
  automobile accident
• misreporting wage losses due to injuries
• reporting higher costs for car repairs than those
  that were actually paid
• Hard auto-insurance fraud
• staging automobile collisions
• filing claims when the claimant was not actually
  involved in the accident
• submitting claims for medical treatments that
  were not received
• inventing injuries
• illegally register their car to a location that
  would net them cheaper insurance rates than where
  they actually live, sometimes called "rate
  evasion".
• "fronting registering someone other than the
  real primary driver of a car as the primary
  driver of the car.
• falsely report their vehicle as stolen

8
Coverage

• Automobile coverage are grouped into two
  categories
• A) Bodily Injury Coverage
• Bodily injury liability- for the risk of
  financial loss due to legal expenses, medical
  expenses and other expenses caused by an
  automobile accident for which you are
  responsible.
• Medical Payments covers the cost of healthcare
  for people who are injured in your vehicle.
• Uninsured Motorists Protection- covers the cost
  of injury if you are hit by an uninsured driver.

• B) Property Damage Coverage Protect from
  financial loss due to damage of other peoples
  property or your vehicle.
• Property Damage Liability protects from damage
  to other peoples property, street signs,
  lampposts, buildings etc. The last number in the
  Split Limit irpresents the property damage
  liability (100/200/50).
• Collision- covers the damages to a vehicle in
  case of an accident. However, if you are not at
  fault, the insurance might try to recover the
  money from the other insurance Company (
  Subrogation).
• Comprehensive Physical Damage Covers you for
  other risks such as wind, vandalism, fire ,
  theft, falling objects etc

9
Coverage Limit and Deductibles

• Coverage Limit
• Your auto insurance coverage limit is the
  highest dollar amount an insurance company will
  pay if you make a claim on a covered loss (that's
  insurance-speak for any losses that fall within
  the bounds of your policy).
• The higher your coverage limit, the more the
  company pays, but the higher your premiums will
  be to obtain that coverage.
• Lowering your coverage limit is a good way to
  bring your premiums down and save money now, even
  if you may need to pay more out-of-pocket later,
  after an accident.
• Deductibles
• Your deductible is the amount of money you agree
  to pay out-of-pocket (on your own) when you make
  a claim covered by your policy.
• This means, for example, that if your repairs
  cost 1,500 and you've set your deductible at
  500, theoretically, you'll pay the first 500,
  and the company will pay the remaining 1,000 to
  get your car fixed and back on the road.

10
Auto Insurance Premium Factors

• Age - Statistically, drivers under the age of 25
  are at greater risk of being in an accident
  than those over age 25. Drivers between the
  ages of 50 and 65 generally have the safest
  records.
• Gender - Women are statistically safer drivers,
  but that trend is changing as more female
  drivers get on the road. young unmarried male
  drivers have more accidents and expect to pay
  more premium ( because they have more moving
  violations and license suspensions).
• Marital Status - A married person will pay less
  than a single person with an identical driving
  record.
• Geography Also known as Rating Territory-
  different locations have different costs due to
  the number of claims reported every year.
  Cities such as Los Angeles and New York have
  higher rates.
• Vehicle Type The year, make and model of the
  vehicle impacts the insurance costs. Expensive
  replacement parts and body repairs due to the
  body style may also increase the cost of
  insurance. Other car models such as Mercedes,
  Corvette have higher theft rates thus
  increasing the cost.
• Accident Claims The number of claims that you
  file also affects the rate of premiums.
  Expensive liability settlements and extensive
  property damage increases the rate of premiums.
  
• Driving record _ If you have poor driving record,
  then the insurance company may cancel your
  policy. You therefore get the assigned risk
  Pool where you pay several times the regular
  rate until your driving record improves.

11
Auto Insurance Premium Factors

• Driving Violations - The more driving violations
  you have , the higher the premium you pay.
• Number of miles driven - Drivers pay more when
  they put more miles on their car annually
  because it increases risk. Most auto insurance
  companies provide discounts for low mileage.
• Coverage - Auto insurance calculates premiums
  based on the number of coverages selected by
  the driver, deductibles, and payment limits. The
  more coverage, the greater the cost. However,
  drivers can elect to raise deductibles and lower
  payment limits which reduces the cost of the
  auto insurance.
• Discounts - Auto insurance provides discounts
  for car safety features including daytime
  running lights, airbags, and theft prevention
  systems. It also provides discounts for
  multi-car auto insurance policies, customer
  loyalty, and in some states, driver safety
  courses.
• Miles driven- Drivers pay more when they put more
  miles on their car annually because it
  increases risk. Most auto insurance companies
  provide discounts for low mileage.
• Credit Rating- Many insurance companies view
  having a poor, or even no credit history as
  suggestive of higher risk and thus, charge you
  a higher premium. A better credit score will
  save on insurance premiums.
• Occupation - Insurers have statistically found a
  correlation between your occupation and risk.
  For instance, a newspaper delivery person is most
  likely a higher risk than the personal banker
  sitting at their desk all day.

12
How do you reduce the Premium

• Discounts
• Discounts for Safe Drivers
• - Premier Discount If you've been safe on the
  road and accident-free for the past three
  years, and you're also clear of any moving
  violations, you might qualify for our auto
  insurance Premier Discount
• - Defensive driver class discount If the
  principal driver usually 55 years old or older
  has completed an approved defensive driving
  class a discount could apply.
• Discounts for Safe Cars
• - Passive Restraint Systems If your car came
  equipped with airbags, or factory-installed
  motorized seatbelts, you could receive a Passive
  Restraint Discount on your auto insurance.
• - Auto Safety features Certain states will
  give you discounts for anti-lock breaks, alarm
  systems, fuel shut off, and second ignition.
  These reduce the risk of thest, lowering
  insurance cost.
• Good Student discount If you are a full-time
  student who meets certain grade requirements
  and are unmarried and usually under 25 years of
  age (some states the age is 21) you could be
  eligible for a good student discount.
• -

13
How do you reduce the Premium

• Multiple vehicles discount. This will only apply
  if you have two or more drivers.
• - If you have a clean driving record, meaning
  you do not have any tickets, accidents or
  suspensions in the last three years (some
  companies require five years) then you could be
  eligible for a safe driver's discount.
• Deductibles - Buying a policy with higher
  deductibles will save you money.
• Have a policy with no lapse in it. Renewing on
  time and avoiding cancellations, due to lack of
  payment or otherwise, will help you because at
  renewal a discount may apply.

14
How do Claims affect Premiums?

• Auto claim premiums are affected by three main
  factors
• ISO Symbols
• To determine the cost of repair to a vehicle
  after an accident, insurance companies and agents
  subscribe to a service provided by a company
  called Insurance Services Offices, Inc., or
  ISO.
• This service rates every vehicle produced in the
  USA and throughout the world with a symbol,
  called an ISO symbol. The ISO symbol is built
  in as part of the insurance companys computer
  rating system, (your insurance premium quote).
• In general, the higher the vehicle cost, the
  more expensive to repair, and a higher policy
  premium cost required. The higher the symbol
  number, the higher the insurance premium cost and
  the higher the parts cost, and for a body shop to
  repair.
• Example ISO symbols for 2005 vehicles
• 6 - Dodge Caravan SE 4 dr. Wagon
• 10 - Mercury Sable GS 4 dr. Sedan
• 16 - Honda Accord EX 2 dr. Coupe
• 25 - Audi A8 Quattro 4 dr. Sedan

15
How do Claims affect Premiums?

• Driving Record
• Your premiums are based upon a rating system
  which is filed and regulated by the state or
  country where you live.
• Almost all insurance company premiums are based
  upon an allocation type of rating system. This
  system is set up in order to allocate policy
  premiums fairly and is based upon several
  factors, but one of the main factors is How
  safe are you in your driving record?
• When any person has an accident or a claim, the
  cost which the insurance company must allocate to
  auto policy premium is more than just the cost of
  repairing the vehicle.
• All costs must be allocated based upon a drivers
  statistical likelihood of creating claims.
  Insurance premiums are designed to highly reward
  safe drivers. A claims free driver, will pay less
  than a driver with claims.

16
How do Claims affect Premiums?

• Insurance Fraud
• soft auto-insurance fraud
• filing more than one claim for a single injury
• filing claims for injuries not related to an
  automobile accident
• misreporting wage losses due to injuries
• reporting higher costs for car repairs than those
  that were actually paid
• Hard auto-insurance fraud
• staging automobile collisions
• filing claims when the claimant was not actually
  involved in the accident
• submitting claims for medical treatments that
  were not received
• inventing injuries
• illegally register their car to a location that
  would net them cheaper insurance rates than where
  they actually live, sometimes called "rate
  evasion".
• "fronting registering someone other than the
  real primary driver of a car as the primary
  driver of the car.
• falsely report their vehicle as stolen

17
Works Cited

• Kapoor, Jack R. Personal finance. Homewood, IL
  Irwin, 1991
• Bertot, Cathey H. New financial planner a guide
  to client service. Homewood, Ill Dow
  Jones-Irwin, 1986.
• Crane, Frederick G. Insurance principles and
  practices. New York Wiley, 1980.
• "Factors That Affect Your Car Insurance Premium."
  Car Insurance Get an auto insurance quote, car
  insurance quotes and a fast online insurance
  policy. 26 Apr. 2009 lthttp//www.carinsurance.com
  /Articles/content6.aspxgt.
• "Vehicle insurance -." Wikipedia, the free
  encyclopedia. 26 Apr. 2009 lthttp//en.wikipedia.o
  rg/wiki/Car_insurance www.Carinsurance.com
• www.allstate.com
• www.insure.com