What you will learn during the

course
• Auto Insurance
Welcome to
• Homeowners Insurance
FIN 3360/6360 • Health Insurance
Risk and Insurance • Life Insurance
• Structure of Insurance Industry

State Farm Auto Insurance Policy Declarations Page

• Identifies Insured
• Describes Coverage
• Policy Period: 8/24/07 - 2/23/08
• Premium: $435.08

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 California
• Average auto liability
insurance premium - $391.24
• Average auto collision
insurance premium - $391.24
• Average auto comprehensive
insurance premium - $263.64
• Average auto combined
insurance premium - $765.20
Minimum Limits in California
• Bodily Injury
$15,000 for death or injury of
any one person, any one
accident.
$30,000 for all persons in any
one accident.
• Property Damage
$5,000 for any one accident.
Coverage
A) Bodily Injury Liability
$100,000 Each Person
$300,000 Each Accident
Property Damage Liability
$100,000 Each Accident
This coverage is often described as:
100/300/100
Four Ways to Accomplish Financial
Responsibility in California
• Coverage by a motor vehicle or automobile
liability insurance policy;
• A cash deposit of $35,000 with the Department
of Motor Vehicles (DMV);
• A certificate of self-insurance issued by DMV to
owners of fleets of more than 25 vehicles; or
• A surety bond for $35,000 obtained from an
insurance company licensed to do business in
California.
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 Driver Responsibility in California
Coverage (Continued)
• All California drivers and owners C) Medical Payments
must have at least the statutory limits $25,000 Each Person
of minimum liability insurance or an
approved alternative way to pay for
injury or property damage they may D) Comprehensive
cause. Penalties are very severe for
non-compliance with this section of
the vehicle code. G 100) $100 Deductible Collision
H) Emergency Road Service

Coverage (Continued) Car Policy

U) Uninsured Motor Vehicle
$100,000 Each Person
$300,000 Each Accident
• Your use of your car
W) Underinsured Motor Vehicle
$100,000 Each Person
$300,000 Each Accident

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Definitions
• You or Your - means the named insured
shown on the declarations page
• Your Car - means the car or the vehicle
described on the declarations page
Section I - Liability
• Pays damages which an insured becomes
legally liable to pay because of bodily
injury to others and damage to property and
defends any suit against an insured
When and Where Coverage
Applies
• When - Policy Period shown on the
declarations page
• Where - in the U.S., its territories and
possessions or Canada and (for liability,
medical payments and physical damage
coverage only) in Mexico within 50 miles
of the U.S border
Liability - Additional Coverages
• Court costs
• Interest on damages
• Premiums or costs of bonds
• Expenses incurred by an insured
– Wages up to $100 per day
– First aid at the accident
– At their request
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 Liability Exclusions Liability - Example
• While charging persons for a ride
• While driving your car, you run into another
• For bodily injury to a family member car. The accident is your fault and it costs
• For damage to property owned by, rented to $7,500 to repair the other car.
or in the charge of or transported by an
insured
• For liability assumed by the insured under
any contract or agreement

Liability - Example Medical Payments

• Pays reasonable medical expenses for

• Same accident as before, but you also injure
accidental bodily injury that occurs to you
the driver of the other car. He incurs
while occupying a vehicle covered under
$30,000 in medical bills. He sues you and
the liability section or as a pedestrian if
is awarded $120,000 for bodily injury.
struck by a motor vehicle or trailer

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Medical Payments - Example Definition

• Same accident as before, except you are • Occupying - means in, on,
injured and incur $28,000 in medical bills. entering or alighting from

Medical Payments - Example Answers to Examples

While getting out of your car, you trip
on the curb and break your ankle.
Your medical bills are $4,000.
• Property Damage Liability - Your policy
pays $7,500.
• Bodily Injury Liability - Your policy pays
$100,000.
• Medical Payments, first example - Your
policy pays $25,000.
• Medical Payments, second example - Your
policy pays $4,000.

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 Comprehensive
Pays for loss to your car • Earthquake
except by collision • Windstorm
Comprehensive Includes breakage of • Hail
glass and loss caused
• Water
Collision by:
• Missiles
• Flood
• Malicious mischief or
Emergency Road • Falling objects
vandalism
• Fire
Service • Theft or larceny
• Riot or civil
commotion
• Explosion • Hitting or being hit by
bird or animal

Comprehensive - Example
A 0
Comprehensive - Example B 2400
C 2500
Someone scratches the paint on your D None of the above
car with a tool. It costs $2500 to
sand and paint your car to repair the
damage.

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 Comprehensive -
Transportation Costs
Provides up to $25 per day in
transportation costs if your car is
stolen after you report the loss and
ending when they offer to pay the
loss
Comprehensive -
Transportation Costs - Example
Your car is stolen. You immediately
report the loss and rent a
replacement for $40 per day. Six
days later State Farm settles your
claim.

Comprehensive -
Transportation Costs - Example
A 0
B 64 Collision
C 80
D 96 Pays for loss to your car caused by
E None of the above collision but only for the amount of
each such loss in excess of the
deductible.

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Definition
Collision - means your car upset or
hit or was hit by a vehicle or other
object.
Collision - Example
Your car is parked at Marketplace
while you are shopping. When you
return to your car, the rear fender is
smashed. You can’t find out who
ran into your car. It costs $700 to
repair the damage.

Clothes and Luggage -

Collision - Example
Comprehensive and Collision
A 0
B 600 Pays up to $200 in
excess of the
C 700 deductible for loss
D None of the above to your clothes and
luggage if they
were in the car at
the time of the loss.

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 Clothes and Luggage - Clothes and Luggage - Example
Comprehensive
Loss must be caused by: You decide to drive to Los Angeles
• Fire for the weekend. While your car is
• Lightning parked at the Speedway, someone
• Flood breaks into your car and steals your
luggage, which contained your
• Falling objects
clothes. The luggage was worth
• Explosion $100 and the clothes were worth
• Earthquake $200.
• Theft of the entire car

Limits of Liability -
Clothes and Luggage - Example
Comprehensive and Collision
A 0 The limit of liability is the lower of:
B 100 • actual cash value
C 200 • the cost of repair or replacement
D 300
E None of the above

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Emergency Road Service
Pays the cost you incur for:
• up to 1 hour of labor costs at site of
breakdown
• towing to nearest repair location
• towing out if stuck on or next to public
highway
• delivery of gas, oil, loaned battery or
change of tire - does not pay for the cost of
these items
Emergency Road Service -
Example
While driving you get a flat tire.
When you discover you don’t have
a spare, you call a service station
for help. They bring you a new tire
and put it on your car. They charge
$100 for the new tire and $25 for
changing your tire.

Emergency Road Service -

Example
Uninsured Motor
A 0
B 25
Vehicle Coverage
C 100 Underinsured Motor
D 125 Vehicle Coverage
E None of the above

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 Uninsured Motor Vehicle
Pays damages for accidental bodily
injury an insured is legally entitled
to collect from the owner or driver
of an uninsured motor vehicle
Deciding Fault and Amount
• Whether the insured is legally entitled to
collect damages and, if so, the amount must
be decided by agreement between the
insured and State Farm
• If there is no agreement, these questions
will be settled by arbitration
Definition of Uninsured Motor
Vehicle
• A motor vehicle without insurance, with
insurance limits below the legally required
limits in your state, or if the insurer denies
coverage or becomes insolvent
• A “hit-and-run” motor vehicle whose owner
or driver is unknown which strikes the
insured or the vehicle the insured is
occupying
Uninsured Motor Vehicle -
Example
You are driving your car when you are hit
from behind by an uninsured driver. You
are injured and taken to the hospital for
treatment. You incur $5,000 in medical
bills. You would be entitled to a bodily
injury award of $15,000 if the other driver
had been insured.
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 Uninsured Motor Vehicle -
Underinsured Motor Vehicle
Example
A 0 Same as Uninsured Motor Vehicle
B 5,000 except this applies if the at fault
C 15,000 driver has bodily injury limits less
than your Uninsured Motor Vehicle
D 20,000
coverage (100/300)
E None of the above

Underinsured Motor Vehicle - Underinsured Motor Vehicle -

Example Example
A 0
As a pedestrian you are B 20,000
hit by a driver with
C 30,000
20/40 bodily injury
limits. You are D 50,000
entitled to a $50,000 E None of the above
bodily injury award.

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How Do Medical Payments and
Uninsured/Underinsured Motor
Vehicle Coverages Combine?
4. “The uninsured motor vehicle
coverage shall be excess over and
shall not pay again any medical
expenses paid under the medical
payments coverage.”
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Medical Payments and Uninsured
Motor Vehicle - Example
A 0
B 25,000
C 100,000
D 110,000
E None of the above
Medical Payments and
Uninsured Motor Vehicle -
Example
An uninsured driver going the wrong way on a
one way street hits you while you are in your
car. You incur $25,000 in medical bills and
$20,000 in lost wages. You would be
entitled to a bodily injury award of $110,000
if the driver had been insured.
Medical Payments and Uninsured
Motor Vehicle - Example
Bodily Injury Award consists of:
25,000 medical expenses
20,000 lost wages
65,000 pain-and-suffering
110,000 total
State Farm pays
25,000 under Medical Payments
85,000 under Uninsured Motor Vehicle
110,000 total
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