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Lecture 4

Lecture 4 Auton Insurance Policy

9 Pages

Course Code
FIN 3440

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PERSONAL AUTO INSURANCE POLICY OverviewAn automobile insurance policy or personal auto policy PAP as it is commonly referred to today consists of several types of insuranceSome are mandatory and some are optional depending on state lawYou can tailor the amount of coverage and the cost for each type of insurance to fit your particular situationThe PAP is actually one of the more complex insurance contracts because it provides coverage against different types of losses and circumstancesThecovered include legal liability injury to the types of lossesinsured or members of hisher family and damage to or loss of the automobileThe PAP is also designed for varied circumstancesto provide protection for the owner when someone else is operating hisher auto or when the insured is driving someone elses carChapter 22 p 113140 and Appendix B p 188201 of your text should be read together because Chapter 22 is essentially a tour guide of the personal auto policy in Appendix BAs your author notes at the beginning of Chapter 22 the auto policy in Appendix B is issued by the Insurance Services Office ISO an organization once owned by the insurance industry became independent corporation in 1997 to pool data to publish standardized insurance contracts and to perform other services for the industryRecall from our prior lecture why functions such as pooling of industry data and the issue of standardized contracts are neededto better analyze and forecast losses and to better price insurance products to reduce the chances of insurer insolvency Chapter 22 and Appendix B are likely to have as much or more practical importance to you as any other two chapters that you have read in your studies at LSUWhyBecause most of you probably own or drive a car and because most people not just students but parents also do not read their insurance contracts and know important details contained within themChapter 22 does a nice job of explaining the auto policy contract provisions in Appendix B in sequence and provides numerous examples of what some of the more ambiguous provisions really mean Discussed below are your lecture notes for Chapter 22AppendixFor the sake of brevity text quotations below for the auto policy are from Chapter 22 not Appendix B therefore refer to Appendix B for the specific language of the sample ISO auto policy PART ALIABILITY COVERAGELiability coverage Part A is the most important part of the PAPIt protects a covered person against a suit or claim arising out of the ownership or operation of a covered vehicle Chapter 22 p 115Who is covered under the policyThe named insured and any resident family member and any person using the namedinsureds covered auto with permission Chapter 22 p 116What about intentional injury or damageNot covered Chapter 22 p 117 BODILY INJURYPays for the other drivers medical treatments rehabilitation or funeral costs the other drivers passengers passengers in your car and pedestriansIt also pays legal costs and settlements for non monetary losses pain and suffering up to the limit of the policyCoverage for bodily injury and property damage is typically provided with split limits and single limits as well but we will not discuss single limits that specify separate perperson and peraccident bodily injury limits and a separate limit for property damageThe minimum limits vary by stateIn Louisiana the compulsory liability provision was 100002000010000 commonly referred to as 102010 for many years but effective January 1 2010 the minimum liability provision for Louisiana drivers increased to 153025The first two numbers in the expression 153025 are for bodily injury per personper accident and the third number is for property damageTherefore if you are liable in a Louisiana auto accident and you have the minimum liability coverage required above your policy will pay up to 15000 for bodily injury to one person 30000 for bodily injury per accident and 25000 for property damage
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