Chapter 9
Section 9-4 Vehicle Insurance
Textbook: Mathematics w/Business Applications
Workbook: Mathematics w/Business Applications
Notes/Vocab:
Liability Insurance-provides financial protection to the policyholder against claims for bodily injury and
property damage as a result of an automobile accident. Combined coverage is often listed as 100/300/50.
 100/300 refers to the bodily injury coverage and means that the insurance company:
will pay up to $100,000 to any one person injured /$300,000 if more than one person is injured.
 50-refers to property damage limit of $50,000
Collision insurance-pays for damage to the insured vehicle caused by a collision with another motor vehicle or
an object such as a telephone pole.
Comprehensive insurance- pays for damage to the insured vehicle from loses due to fire, vandalism, theft, and
just about any cause other than a collision.
Deductible clause-clause in an insurance policy that requires the insured to pay a certain amount to cover
repairs before the insurance company pays.
 Ex.- $500 deductible clause –means that you must pay the first $500 of the repair bill.
Total repair= $4400-$500 (you pay) =$3900 (insurance company pays this amount.
Annual base premium- determines the cost of your vehicle insurance. Involves 3 factors:
1. The amount of insurance you carry
2. How old your vehicle is
3. The insurance-rating group depending on the size & value of your vehicle.
Annual base premium= liability premium + collision premium + comprehensive premium
Annual premium-amount you pay each year for insurance coverage. These factors determine your annual
premium:
1. Cost of the annual base premium-depends on the amount & type of coverage you carry
2. Driver-rating factor-depends on your age, marital status, number of miles you drive each week, whether
you drive a long distance to work, & if you use your vehicle for pleasure or business.
**if several people drive your vehicle, insurance company uses the highest driver-rating factor among them to
determine the annual premium. Tables are used to determine your basic premium**
Annual premium = Annual base premium x driver-rating factor
Example: *use figure 9-3 on pg. 351
Driver-rating factor is 3.10. Age, rating group is C, 14 Coverage: 50/100 bodily injury
$50,000 property damage $50-deductible collision
What is the annual base premium?
What is the annual premium?