Managing Your Managing Your Personal Finance Personal Finance

UNIT 3:3 GETTING YOR FIRST CAR

Topic: CAR INSURANCE

Unit Standards:Unit Standards:3.1 Student will be able to analyze and

apply multiple sources of financial information when making financial decisions about automobile purchases.

3.2 Students will understand the costs and benefits associated with attaining a car for cash, loan, and lease.

3.3 Students will understand the components and costs of car insurance and explain the importance of protection against financial loss.

Goals of the day:Goals of the day:1. I can describe the main

components of car insurance.2. I can explain factors that affect

insurance price.3. I can create a poster that

illustrates either 1 or 2 above.

Key terms:Key terms:• Auto Insurance Coverage:

insurance that pays for the costs associated with an auto accident

• Policy Holder: the owner of the vehicle.

Key terms:Key terms:• Premium: the annual cost of

insurance• Deductible: the part of the

loss that the policy holder agrees to pay

• Collision: type of coverage helps pay for damage to a covered vehicle.

What is auto insurance What is auto insurance coverage?coverage?

A policy purchased by vehicle owners to cover costs associated with getting into an auto accident (or theft of the vehicle.)

What is auto insurance What is auto insurance coverage?coverage?Instead of paying for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

Auto Liability Coverage:Auto Liability Coverage:Auto Liability Coverage: pays for the damage if you are legally responsible for accidently injuring someone, or for damaging another vehicle or other property in an auto accident. Cont.

Auto Liability Coverage:Auto Liability Coverage:• Bodily injury liability: covers

medical expenses, pain and suffering, lost wages and other special damages.

• Property damage: covers damaged property and may include loss of use.

Cont.

Auto Liability Coverage:Auto Liability Coverage:

Also pays for legal defense and court costs. State laws usually dictate the minimum amounts of auto liability insurance required.

Collision:Collision:This coverage helps pay for damage to a covered vehicle by: •Collision with another vehicle•Collision with an object•A vehicle rolloverA deductible (the part of the loss that the policy holder agrees to pay) is required.

Cont.

Comprehensive Comprehensive Insurance:Insurance:This coverage helps pay for loss or of damage to an insured vehicle, not caused by a collision or vehicle rollover.

Cont.

Comprehensive Comprehensive Insurance (cont.):Insurance (cont.):Examples of comprehensive damage or loss include:

Fire, wind, hail, flood, vandalism, theft, and hitting an animal.

A deductible may apply.

DO NOW:DO NOW: Why is it important to have auto insurance? What would happen if you drove without insurance?

Who is covered by a Who is covered by a policy?policy?Typically covers:•Policyholder (and spouse)•Relatives who live in your home•Other licensed drivers who have permission from the policyholder

What is an auto What is an auto insurance deductible?insurance deductible?• Deductible is part of a covered

loss that you have agreed to pay with your own money.

• If you file a claim against your insurance, you pay only the amount of your deductible (the insurance pays up to your coverage.)

Cont.

DO NOW: Insurance DO NOW: Insurance Deductible #1Deductible #1

You get into an accident that costs $2,500 to repair. If your insurance deductible is $500:

How much do you pay?____________

How much does your insurance company pay?___________________

DO NOW: Insurance DO NOW: Insurance Deductible 2Deductible 2

You get into an accident that costs $3,500 to repair. If your insurance deductible is $1,000:

How much do you pay?____________

How much does your insurance company pay?___________________

What is an auto What is an auto insurance deductible?insurance deductible?Typically, higher deductibles mean lower auto insurance policy premiums.

Higher Deductions= Lower Premiums

Lower Deductions = Higher Premiums

What affects car What affects car insurance price?insurance price?Insurance companies look at the following to determine your auto insurance premium:1. What you buy:•The coverages you include•The deductibles Cont.

What affects car What affects car insurance price?insurance price?2. What kind of car you drive?Generally, the more expensive the car, the higher the auto insurance price.

Cont.

What affects car What affects car insurance price?insurance price?3. Where you drive?Generally, due to higher rates of vandalism, theft, and accidents, people who live in the city pay a higher premium than those in small towns.

Cont.

What affects car What affects car insurance price?insurance price?4. How much you drive?Generally, people who use their car for business and long-distance commuting normally pay a higher insurance premium than those who drive less. Cont.

What affects car What affects car insurance price?insurance price?5. Your age, sex and marital status.Accident rates are higher for all drivers under age 25 (especially young and single males.) Car insurance prices vary between states.

What affects car What affects car insurance price?insurance price?6. Your driving record.Drivers who cause accidents generally must pay higher car insurance premiums than those who are accident-free for several years.

What affects car What affects car insurance price?insurance price?7. Your credit history.Many insurance companies consider credit credit characteristics in addition to other factors when determining an individual’s premium.

What can you do to save What can you do to save money on your auto money on your auto insurance premium?insurance premium?When shopping for a car, consider how your choice will affect car insurance premium. (Some companies increase premiums for cars more susceptible to damage or occupant injury.)

Cont.

What can you do to save What can you do to save money on your auto money on your auto insurance premium?insurance premium?

Drive Carefully!

Cont.

What can you do to save What can you do to save money on your auto money on your auto insurance premium?insurance premium?Always ask the insurance agent about available discounts. (For example, some companies provide a discount for students with good academic standing.)

How much coverage do How much coverage do I need?I need?Question #1. Where should my deductible be set ?To consider: do I want to pay a higher deductible (for each accident) or higher insurance premium costs. Cont.

How much coverage do How much coverage do I need?I need?Question #2. How high should my collision and comprehensive be?To consider: how much can you afford to pay on short notice in order to save on your premium. Cont.

How much coverage do How much coverage do I need?I need?

Question #3. Should my coverage include collision and comprehensive?To consider: What amounts are you required to carry if your vehicle is leased or financed? Would the savings offset the risk?

Answer the following questions:Answer the following questions:(See Handout)(See Handout)

Goal of the Activity: To check your understanding of basic concepts contained in the insurance notes.

DO NOW:DO NOW:

Create a poster that shows: the main components of car

insurance, or explain factors that affect

insurance rates