Insurance Exam Review Notes Chapter 13 Automobile Insurance Major loss arising out of automobile insurance 1 Legal liability for harm you may cause to others as a result of your negligence 2 Bodily injury to you and members of your family 3 Property damage to and or theft of your vehicle s 4 Main types of in auto policy coverage 1 Third party liability coverage for liability to third parties harmed by negligence of an insured person 2 first party medical payments coverage for insured or in state with no fault or related laws personal injury protection coverage for the insured s medical expenses and loss of income 3 Uninsured and underinsured motorist coverage for losses caused to an insured by drivers without liability insurance and drivers with comparatively low liability insurance limits 4 Coverage for physical damage to or theft of insured autos Type of Loss Auto insurance Coverage Your liability coverage Other insurance that may apply Your personal umbrella liability insurance coverage Your legal liability for negligently causing 1 bodily injury to others including economic losses and pain and suffering 2 Property damage to others including loss of use and 3 defense cost Your economic losses from bodily injury Your Pain Suffering Collision damage to your vehicle Your group or individual medical disability life insurance Workers compensation insurance if work related injury Social security disability survivor benefits or Medicare An at fault driver s liability coverage Your first party medical payments coverage or personal injury protection coverage Your uninsured or underinsured motorists coverage if other driver is at fault and uninsured or underinsured An at fault driver s liability insurance Your uninsured or underinsured motorist coverage if other driver is at fault An at fault driver s liability coverage None None Your collision coverage Your uninsured or underinsured motorist coverage if other driver is at fault Your Other than collision comprehensive coverage None Other damage to and theft of your vehicle Auto Liability Coverage Personal auto policy provides broad coverage for liability fir bodily injury and property damage to other parties arising out of use of an automobile by an insured person Single Limit specifies maximum amount that the insurer will pay for all damages from a single accident Split Limit Policies can separate limits that specify the maximum that the insurer will pay per accident 1 to each injured person for bodily injury 2 in total to all injured person for bodily injury and 3 up to 50 000 for total property damage regardless of how many vehicles are damaged by the insured Compulsory Liability Insurance laws Mandate that the purchase of a minimum amount of auto liability coverage by auto owners Minimum amounts are specified as split limits with the per person minimum ranging from 10k to 50k Financial Responsibility Law penalizes drivers with fines and possible loss of driving privileges under certain conditions if they negligently cause accidents and are unable to pay specified minimum amount of damages Basic limits Minimum liability coverage available in a personal auto policy policy covers the named insured which includes a resident spouse and other family members residing in the same household Auto Liability coverage excludes Intentional injury or damages 1 2 Losses to property owned by transported by rented to or in the insured s care which often are covered under homeowners insurance 3 Bodily injury to an employee covered by worker s compensation 4 Coverage for a vehicle that is being hired out to the general public such as using your car 5 Certain types of business vehicles for example those used in automobile business and as a taxi large trucks 6 Vehicles used without a reasonable belief that the homeowner has given permission 7 Vehicles with less than four wheels such as motorcycles Medical Payment Coverage Auto owners can receive medical payment for medical expenses arising out of an accident Limits are 1k to 10k per injured person with many persons 1k to 2 500 States with no fault laws have Personal injury protection coverage for the named insured family members and parties hurt while occupying a covered auto instead of medical payments coverage Uninsured Motorist Coverage allows the insured to recover damages from his or her own insurer up to the policy limit coverage for bodily injury include medical expenses loss of income pain and suffering Underinsured Motorist Coverage Coverage applies when the at fault driver has liability insurance with limits that are less than the insured s underinsured motorist limits allows an insured person to recover damages from his or her own insurer that in principle could have been obtained from an insured at fault driver including damages for pain and suffering Two Optional Coverage s for Damage and Theft to Vehicles Collision coverage covers the upset roll over of a covered auto or impact with another object Other than collision coverage or comprehensive coverage covers theft of the vehicle and damage from missiles or falling objects explosions earthquake windstorm hail water flood vandalism riot glass breakage and contact with a bird or animal Rating Factors of auto policies 1 Driver classes that reflect the characteristic of individual insured s and 2 Territorial ratings to reflect expected differences in claim costs for people who live in different geographical areas 3 Driver Classes 4 Age 5 Gender 6 Marital Status 7 Use of Automobile 8 Number of Automobiles and accompanying homeowner s coverage 9 Miscellaneous factors 10 Driving Record 11 Territorial Rating 12 Government restrictions on Rating Factors Ex States like Mississippi prohibit gender and marital status as rating factors Residual Markets enable drivers who might otherwise find it difficult to obtain coverage at a regulated price Four types of auto insurance residual markets Common features of residual markets are 1 Guaranteed access to coverage at a regulated rate 2 Any residual market deficit excess losses and expenses over premiums is spread broadly across auto insurers and or auto insurance policy holders Assigned Risk Plan Plan assigns applicants to individual insurers at rates that have been approved by regulators Reinsurance Facilities each insurer is required to issue coverage to virtually anyone who applies to the insurer using rates that have been approved by the government underwriting is prohibited 2 approaches to dealing