The document provides an overview of how collision insurance works. It explains that collision insurance will pay to repair or replace an insured's vehicle if it is damaged in an accident, up to the value of the vehicle. The insured is responsible for paying a deductible before insurance begins covering repairs. Collision insurance is not required by law in California. It can help cover costs if a vehicle is damaged in a crash or upset, but will not cover damage if something falls on a parked vehicle.
18. 18
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
19. 19
Required in California
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
20. 20
What Liability is
– This is an example of baby talk.
Some teenagers say, “It really wasn’t my
fault. It was just an accident.”
21. 21
What Liability is
• In the grown-up world we have the idea of
negligence.
• You are negligent if you should have been
more careful.
• It’s your fault if you are negligent.
• Now you have to pay for what you did. It’s
your fault. Crying won’t help. You are liable.
22. Two parts of
car insurance
are required
by the state of
California.
22
23. 23
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
26. 26
Bodily Injury Liability Insurance
You will have to pay all their medical bills or,
if you have Bodily Injury Liability car
insurance, the insurance company will pay
(up to the limit of your policy).
27. 27
Bodily Injury Liability
• You hurt another person’s body
• You have to pay for their injuries
because it was your fault—you are
“liable”
For example, you drive into someone
who is walking in a crosswalk and break
their leg
28. Bodily Injury Liability
28
You need Bodily Injury Liability
insurance to pay the cost of their
medical bills, pain and suffering.
29. Bodily Injury Liability
29
You need Bodily Injury Liability
insurance to pay the cost of their
medical bills, pain and suffering.
You paid a small premium
Your insurance company will
pay for their medical bills,
pain and suffering (up to the
limit of your policy)
$15,000
31. 31
Bodily Injury Liability
• Required by the state of California
• You must buy Bodily Injury Liability
insurance
– You must buy at least $15,000 of BI in case
you hurt one person in an accident
– You must also buy at least $30,000 of BI in
case you hurt more than one person in an
accident
– This is called 15/30 BI insurance
32. 32
Bodily Injury Liability
What if you have $15,000 of
Bodily Injury Liability insurance
but the other person’s medical
bills come to $265,000?
$265,000 damage
$15,000 of
bodily injury
insurance
33. 33
Bodily Injury Liability
What if you have $15,000 of
Bodily Injury Liability insurance
but the other person’s medical
bills come to $265,000?
You pay the remaining $250,000.
$265,000 damage
$15,000 of
bodily injury
insurance
$250,000 paid
by you
34. 34
Bodily Injury Liability
Perhaps your parents will have
to sell their house to get the
money to pay.
$265,000 damage
$15,000 of
bodily injury
insurance
$250,000 paid
by you
35. 35
Bodily Injury Liability
Buy lots of Bodily Injury Liability
insurance!
$265,000 damage
$265,000 of
bodily injury
insurance
36. 36
Bodily Injury Liability
• Are you covered by BI insurance?
– You smash into another car and the other
driver’s head is hurt
37. 37
Bodily Injury Liability
• Are you covered by BI insurance?
– You smash into another car and the other
driver’s head is hurt
Yes, they are hurt and it’s your fault
39. 39
Bodily Injury Liability
• Are you covered by BI insurance?
– You hit a dog and break it’s leg
No, dogs are not people
40. 40
Bodily Injury Liability
• Are you covered by BI insurance?
– You skid off the road and crack your head on
the driver’s window
41. 41
Bodily Injury Liability
• Are you covered by BI insurance?
– You skid off the road and crack your head on
the driver’s window
No, BI covers other people you hurt,
not you
42. 42
Bodily Injury Liability
• Are you covered by BI insurance?
– You run into a telephone pole and your
passenger, a friend of yours, gets a gash on
their forearm.
43. 43
Bodily Injury Liability
• Are you covered by BI insurance?
– You run into a telephone pole and your
passenger, a friend of yours, gets a gash on
their forearm.
Yes, they are hurt; it’s your fault.
Note: if your passenger is a member of
your household, they would probably NOT
be covered by BI insurance.
44. 44
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
46. 46
Property Damage
Liability
• You damage another
person’s property
• You have to pay for the damage because
it was your fault—you are “liable”
– For example, you crash into someone’s car
damaging their car.
47. 47
Property Damage
Liability
You need Property Damage
Liability insurance to cover
the cost of repairing or
replacing their property.
You paid a small premium
Your insurance company will pay
to repair or replace their property
(up to the limit of your policy)
$5,000
49. 49
Property Damage Liability
• Required by the state of California
• You must buy Property Damage Liability
insurance
– You must buy at least $5,000 of PD in case
you damage another person’s property
50. 50
Property Damage Liability
What if you have $5,000 of
Property Damage Liability
insurance but the other
person’s car repair bills come
to $15,000?
$15,000 damage
$5,000 of
property
damage
insurance
51. 51
Property Damage Liability
What if you have $5,000 of
Property Damage Liability
insurance but the other
person’s car repair bills come
to $15,000?
You pay the remaining $10,000
$15,000 damage
$5,000 of
property
damage
insurance
$10,000 paid
by you
52. 52
Property Damage Liability
You pay the remaining $10,000
What if you don’t have $10,000?
$15,000 damage
$5,000 of
property
damage
insurance
$10,000 paid
by you
53. 53
Property Damage Liability
You pay the remaining $10,000
What if you don’t have $10,000?
$15,000 damage
$5,000 of
property
damage
insurance
$10,000 paid
by you
54. 54
Property Damage Liability
You pay the remaining $10,000
What if you don’t have $10,000?
$15,000 damage
$5,000 of
property
damage
insurance
$10,000 paid
by you
Future wages
garnished.
55. 55
Liability Insurance, in general
Minimum required Bodily Injury Liability and
Property Damage Liability is often referred to as:
15/30/5 insurance
$15,000 for hurting one person in an accident
$30,000 for hurting all the people in an accident
$5,000 for Property Damage
57. 57
Property Damage Liability
• Are you covered by PD insurance?
– You skid off the road and crash into a wooden
fence
Yes, you damaged someone else’s
property—their fence. Your Property
Damage Liability insurance will pay to
repair the fence.
58. 58
Property Damage Liability
• Are you covered by PD insurance?
– You are driving under the speed limit. A dog
runs into the street and you hit it. The dog is
hurt.
59. 59
Property Damage Liability
• Are you covered by PD insurance?
– You are driving under the speed limit. A dog
runs into the street and you hit it. The dog is
hurt.
No, you are not at fault. Dogs are
required by law to be under the control of
their owners at all times. You are not
liable. You do not have to pay the
medical bills for the dog.
60. 60
Property Damage Liability
• Are you covered by PD insurance?
– You crash into the car in front of you. No one
is hurt.
61. 61
Property Damage Liability
• Are you covered by PD insurance?
– You crash into the car in front of you. No one
is hurt.
Yes, you damaged someone else’s
property—their car. Your Property
Damage Liability insurance will pay to
repair the other person’s car.
62. 62
Property Damage Liability
• Are you covered by PD insurance?
– You skid off the road and roll into small pond.
Your car has $2,000 of damage.
63. 63
Property Damage Liability
• Are you covered by PD insurance?
– You skid off the road and roll into small pond.
Your car has $2,000 of damage.
No, you damaged your own property—not
someone else’s. Property Damage
Liability only pays for other people’s
property.
64. 64
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
68. 68
Collision
• Pays to have YOUR car
repaired.
• Collision coverage will repair or replace
your car up to value of your car
– For example: You crash your car into a brick
wall. It will take $10,000 to repair your car.
Your car is only worth $6,000. The insurance
company will only pay you $6,000 to replace
your car.
69. Collision
Will only pay for
repairing your car if
the cost of repair is
less than the value
of your car.
69
Collision will not pay
$4,000 to repair a car
that is only worth $200.
71. 71
Collision insurance
• Has a “deductible”
– You pay the deductible before the insurance
begins to pay for the repair
72. 72
Collision insurance
• Has a “deductible”
– You pay the deductible before the insurance
begins to pay for the repair
You paid a small premium
Your insurance company will pay
to repair or replace your car (up to
the value of your car)
Value of
your car
You pay the deductible
73. 73
Collision insurance
• Has a “deductible”
– A typical deductible might be $500 or $1000
You paid a small premium
Your insurance company will pay
to repair or replace your car (up to
the value of your car)
Value of
your car
You pay the deductible
74. 74
Collision insurance
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
$2000 damage
– For example: You have $2000 of
collision damage and a $500
deductible collision insurance
policy.
75. 75
Collision insurance
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
– For example: You have $2000 of
collision damage and a $500
deductible collision insurance
policy. You will pay $500 and the
insurance company will pay the
remaining $1,500
$2000 damage
$500
deductible paid
by you
$1500 paid by
insurance
company
76. 76
Collision insurance
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
– For example: You have $600 of
collision damage and a $500
deductible collision insurance
policy.
$600 damage
77. 77
Collision
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
– For example: You have $600 of
collision damage and a $500
deductible collision insurance
policy. You will pay $500 and the
insurance company will pay the
remaining $100
$600 damage
$500
deductible paid
by you
$100 paid by
insurance
company
78. 78
Collision
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
– For example: You have $400 of
collision damage and a $500
deductible collision insurance
policy.
$400 damage
79. 79
Collision
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
– For example: You have $400 of
collision damage and a $500
deductible collision insurance
policy. You will pay $400 and the
insurance company will pay
nothing.
$400 damage
$400
deductible paid
by you
85. Collision is expensive
85
You can reduce your premium by
increasing your deductible.
Premium
$500 deductible
Premium
$1000 deductible
Car Value Car Value
86. Collision is expensive
86
If you have a older
car that you’re not
making payments
on, you may
consider not
buying this
insurance at all.
88. 88
Collision insurance
• Are you covered by Collision insurance?
– A tree falls on your car while parked in a
parking lot.
89. 89
Collision insurance
• Are you covered by Collision insurance?
– A tree falls on your car while parked in a
parking lot.
No, you were not in a
collision—you did not run into
anything.
90. 90
Collision insurance
• Are you covered by Collision insurance?
– You back into a fire hydrant and crumple your
bumper
91. 91
Collision insurance
• Are you covered by Collision insurance?
– You back into a fire hydrant and crumple your
bumper
Yes, you ran into something—it was a
collision. Collision insurance will pay to
repair your car.
92. 92
Collision insurance
• Are you covered by Collision insurance?
– A block of wood flies out of the pickup truck in
front of you and smashes into your
windshield, cracking it
93. 93
Collision insurance
• Are you covered by Collision insurance?
– A block of wood flies out of the pickup truck in
front of you and smashes into your
windshield, cracking it
No, this is not considered a
collision. We’ll learn more about
this situation in a moment.
94. 94
Collision insurance
• Are you covered by Collision insurance?
– You are speeding around a turn, lose control,
and your car flips over three times. Your car
didn’t run into anything but has damage to the
roof, hood, and doors.
95. 95
Collision insurance
• Are you covered by Collision insurance?
– You are speeding around a turn, lose control,
and your car flips over three times. Your car
didn’t run into anything but has damage to the
roof, hood, and doors.
Yes, you were in an “upset”
which is covered by your collision
insurance.
96. 96
7 parts of a car insurance policy
1. Bodily Injury Liability insurance
2. Property Damage Liability insurance
3. Collision insurance
4. Comprehensive insurance
5. Medical Payments insurance
6. Uninsured Motorist insurance
7. Towing and Road Service insurance
98. 98
Comprehensive
• You car is damaged by
anything except collision or
upset
• Comprehensive includes things like falling
objects, floods, fire, hail, theft, vandalism,
and colliding with an animal.
• NOT required by state of California
104. 104
Comprehensive
• Has a “deductible”
– You pay the deductible before the insurance
begins to pay for the repair
105. 105
Comprehensive
• Has a “deductible”
– You pay the deductible before the insurance
begins to pay for the repair
You paid a small premium
Your insurance company will pay
to repair or replace your car (up to
the value of your car)
Value of
your car
You pay the deductible
106. 106
Comprehensive
• Has a “deductible”
– You pay the deductible before
the insurance begins to pay for
the repair
– For example: You have $4,000
of comprehensive damage and
a $1000 comprehensive
deductible policy. You will pay
$1000 and the insurance
company will pay the remaining
$3,000.
$4000 damage
$1000
deductible paid
by you
$3000 paid by
insurance
company
113. 113
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– Your car is stolen
Yes, Comprehensive insurance
covers theft.
114. 114
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– You run over your garbage can and damage the
axle of your car.
115. 115
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– You run over your garbage can and damage the
axle of your car.
No, this is a collision, not a
comprehensive loss.
116. 116
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– A block of wood flies out of the pickup truck in front
of you and smashes into your windshield, cracking it
117. 117
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– A block of wood flies out of the pickup truck in front
of you and smashes into your windshield, cracking it
Yes, Comprehensive covers
falling objects.
118. 118
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– You skid off the road and drive into small creek.
Your car has no dents but does have $2,000 of
water damage.
119. 119
Comprehensive insurance
• Are you covered by Comprehensive insurance?
– You skid off the road and drive into small creek.
Your car has no dents but does have $2,000 of
water damage.
Yes, Comprehensive covers flooding.
121. What type of insurance will pay?
You are driving too fast,
skid off the road, and
slide into a tree,
denting the
passenger door of
your car. No one is
hurt. You want your
car repaired.
121
122. What type of
insurance will pay?
A thief steals my car
and the police chase
him. The thief
crashes my car into a
brick wall. My car is a
total loss. I want
money to replace my
car.
122
123. What type of insurance will pay?
My brother, who does not live in the same
house as me, borrows my car to go to the
store. He has my permission to drive it.
At the store, while smoking crack cocaine
in the car, he accidentally sets the car on
fire. I need money for a new car.
123
124. What type of insurance will pay?
You are driving on a two lane country road.
A truck, going the other way, kicks a rock
up off the road cracking your windshield.
You turn around, follow the truck and get
it’s license plate. You want your
windshield repaired or replaced.
124
125. What type of insurance will pay?
You are driving on a two lane country road.
A truck, going the other way, kicks a rock
up off the road cracking your windshield.
You are not able to identify the truck. You
want your windshield repaired or replaced.
125
126. What type of insurance will pay?
You are backing up in a parking lot and
bump into a car that was waiting to take
your parking place. Their car’s bumper is
dented but your car seems fine. The
owner of the other car wants their bumper
repaired.
126
127. What type of insurance will pay?
A raccoon got into your car while your were
camping. The raccoon tore up the seats in
your car. You want the seats repaired or
replaced.
127
128. What type of insurance will pay?
A kid threw a rock at your car and ran away.
Now you have a big dent on the driver’s
door. You want the dent repaired.
128
129. What type of insurance will pay?
A big wind came up while you were on the
freeway and pushed your car. You tried to
maintain control but swerved into the car
that was passing you on the left. The
other car ran off the road and flipped over.
The driver was hurt. The other car’s driver
wants money for their medical bills and to
have their car repaired.
129
130. What type of insurance will pay?
A kid wants to cross the street and just runs
out in front of your car. You hit the kid,
knocking him to the ground. His wrist is
hurt and he’s crying. His mother comes
out of a house and takes him to the
hospital. She wants you to pay for the
emergency room treatment.
130
131. What is a “deductible” and
which parts of auto insurance
have a “deductible”?
131
135. 135
Medical Payments
• Pays for medical attention to
anyone who is hurt while in
your car—even you.
– For example, pays for ambulance, surgery,
hospital, even prosthetic devices and funeral
expenses
• NOT required by the state of California
136. 136
Medical Payments insurance
• Pays regardless of who was at fault
• Even pays if you are not in a car at all—
even if you are just a pedestrian or are on
a bicycle.
137. 137
Medical Payments insurance
Only begins to pay after all other medical
insurance you may have is exhausted.
(this idea is called “secondary” insurance.
Medical Payments is an example of
“secondary” insurance)
141. 141
Uninsured Motorist insurance
• You or your passengers are physically hurt
by an uninsured (or underinsured) driver
• The other driver should have Bodily Injury
Liability insurance to cover your injuries.
• Uninsured Motorist insurance covers what
the other driver should have, but may not.
145. 145
Towing and Road
Service insurance
• Your car won’t run and needs to
be towed
• “Road Service” includes things
like a tire change or a jump start
or keys locked in car
146. Towing and Road Service
146
This part of car insurance is cheap.
(less than $5 a month)
You will lock your keys in the car.
You will run out of gas.
152. Gap Insurance
• You take out a loan to buy a car
Loan:
$24,000
Car Value:
$20,000
Gap
153. Gap Insurance
• You take out a loan to buy a car
• You have collision and
comprehensive insurance
Loan:
$24,000
Car Value:
$20,000
Gap
154. Gap Insurance
• You take out a loan to buy a car
• You have collision and
comprehensive insurance
• You total your car or your car is
stolen.
Loan:
$24,000
Car Value:
$20,000
Gap
155. Gap Insurance
• You take out a loan to buy a car
• You have collision and
comprehensive insurance
• You total your car or your car is
stolen.
• The insurance company pays
you the current value of the car Loan:
$24,000
Car Value:
$20,000
Gap
156. Gap Insurance
• You take out a loan to buy a car
• You have collision and
comprehensive insurance
• You total your car or your car is
stolen.
• The insurance company pays
you the current value of the car
• You still have to pay off the loan
Loan:
$24,000
Car Value:
$20,000
Gap
157. Gap Insurance
• You take out a loan to buy a car
• You have collision and
comprehensive insurance
• You total your car or your car is
stolen.
• The insurance company pays
you the current value of the car
• You still have to pay off the loan
• The current value of the car is
less than what you owe on the
loan—you have a “gap”
Loan:
$24,000
Car Value:
$20,000
Gap