Explain a deductible, out-of-pocket expenses, and what insurance will pay for in different situations
List factors that determine auto insurance premiums
Describe the main types of auto insurance policies and compare state requirements
Choose an appropriate level of car insurance coverage
VIDEO: 5 Factors That Affect What You Pay for Auto Insurance
Everyone pays a different amount for auto insurance. Watch this video to learn five key factors that influence how much you’ll pay. Then, answer the questions.
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Question 1
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Complete the sentences in the chart as you watch.
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Question 2
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Can you think of any other factors, not listed above, that could influence your auto insurance premiums?
ARTICLE: Deductibles and Coverage Limits
In every auto accident, after asking, “Is everyone safe?”, one of the most important questions you may want answered is, “Who pays?” Understanding your deductible and coverage limits is crucial to determining that. Review the explanations and examples in this article, and then determine “Who pays?” in these sample scenarios.
Important Note: This resource reflects this information but does not directly address it: For auto insurance, if the insurance claim is a liability, where the insured driver has harmed another person and/or damaged another person’s property, the insured driver does NOT owe a deductible; insurance covers the entire bill up to the coverage limit. If the insurance claim is to replace or repair the insured driver’s own property, the insured driver WILL typically owe a deductible.
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Question 3
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Norris has a deductible of $1,000. He damages his car in an accident and it will cost $3,300 to repair. Assume he is at fault.
How much does Norris have to pay?
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How much does his insurance pay?
_______
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ARTICLE: Minimum Car Insurance Requirements by State
Another component of having auto insurance is knowing what your state's requirements are. Each state requires drivers to carry different levels of insurance to be legally allowed to drive. Review the information and answer the following questions.
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Question 7
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Which state have the most strict requirements?
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Question 8
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If you could choose, would you prefer to live in a state with strict or lenient requirements for auto insurance coverage? Why?
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Research
Do a quick search to find out:
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Using Expected Value to Buy Car Insurance
Expected value can help you make decisions when the future is uncertain. When you buy car insurance, you need to choose the types of coverage and the amount of coverage that you want. Both of these decisions involve weighing the risks of car accidents and other expenses with the cost of the coverage. Read Lexi’s profile below and answer the questions to help them decide how much liability coverage to purchase.
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Question 20
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Which plan should Lexi choose? Explain your reasoning.
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Alicia has a collision deductible of $500 and a Bodily Injury Liability coverage limit of $50,000. She hits another driver and injures them severely. The case goes to trial and there is a verdict to compensate the injured person for $40,000
How much does Alicia have to pay?
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How much does her insurance pay?
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Question 5
5.
Just before the accident, Alicia actually reduced her policy from $50,000 to $25,000.
How much does Alicia have to pay?
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How much does her insurance pay?
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Question 6
6.
Locate the California insurance requirements and list them. What does each of those requirements mean?
Requirement 1:
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What does it mean?
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Requirement 2:
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What does it mean?
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Requirement 3:
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What does it mean?
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Question 9
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Almost every single state requires drivers to have liability coverage. Why do you think that is the case?
Question 10
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What GPA is required to earn a Good Student Discount on an auto insurance policy?
Question 11
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Find 2 different discounts online and list them here.
1._______
2._______
Question 12
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Why do you think that most automobile insurers offer discounts based on good grades?
Question 13
13.
What else might you want to know about a high school student before providing them with an auto insurance policy?
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14.
How long will most driving violations affect your car insurance rates?
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15.
What driving violations do you think are most common among teen drivers?
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16.
Why do you think that insurance companies increase the cost of auto insurance for those who have driving violations for so many years after the violation?
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Does this seem fair to you? Why or why not?
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Lexi is shopping for car insurance; help them decide which level of liability coverage is right for them.
Their state requires at least $20,000 in bodily injury liability insurance.
They commute to work each day in their 2018 Subaru Outback
Each year, they drive approximately 15,000 miles.
The table below shows the estimated probabilities of Lexi being in an accident that causes an injury or fatality over the next year.[1] Use it to answer the following questions.
a. What is P(injury or fatal crash)? Assume the outcomes are mutually exclusive. _______
b. What is Lexi’s expected value of injury costs for the year, without any insurance?_______
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Lexi can offset some of the risk of these costs by purchasing bodily injury liability coverage. Their state requires at least basic coverage. Use the table of their coverage options to answer the following questions.
a. Lexi looks at the plan options and the probability table. They say “That’s too expensive! I’m not paying at least $25 per month when I have less than a 2% chance of getting in an accident.” What would you say to Lexi? _______
b. Including insurance premiums, what are Lexi’s expected total bodily injury costs for one year with the basic plan? Hint: Map out the sample space, including how much Lexi would end up paying for each outcome if they had the basic plan. Then, find the expected value. _______
c. Including insurance premiums, what are Lexi’s expected total bodily injury costs for one year with the moderate plan? _______
d. Including insurance premiums, what are Lexi’s expected total bodily injury costs for one year with the enhanced plan? _______