Section 7 Topic 3: Auto Insurance
professor penny
According to the National Insurance Crime Bureau, the five most reported stolen vehicles in 2017 were Honda Civic, Honda Accord, Ford pickup trucks, Chevrolet pickup trucks, and the Toyota Camry. Beyond just having insurance, you need the right kind and right level of coverage to insure against financial hardship if something happens to you and/or your vehicle.
Learning goals
By the end of this topic, you should be able to:
- Define the key terms of auto insurance
- Identify the factors that affect your auto insurance premium
- Explain how to respond if you are in an auto accident
section outline
Topic 3 Auto Insurance
3.1 The Language of Auto Insurance
3.2 Auto Insurance Premiums
3.3 If You Are in an Auto Accident
Content Videos
The Gus A. Stavros Center for the Advancement of Free Enterprise and Economic Education at Florida State University is pleased to offer these resources. They were created by Teaching Professor Joe Calhoun.
The captions were created by a computer program so sometimes they may be inaccurate or contain spelling or grammatical errors.
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Part a
Part b
key point
Get at least three insurance quotes and make sure they are comparable before selecting an insurance company.
Certified peer mentors
Mentors give presentations to groups about our topics. They also assist other students in personal finance matters and answer questions during individual meetings. To schedule a presentation or an appointment to discuss your situation email coss-financialpeermentor@fsu.edu or visit the Stavros Center financial wellness page.
a topical story
Jamal and Jayla were on their way to Ethan’s in their shared car. They’d been sharing the hand-me-down car since they had learned to drive and were becoming increasingly annoyed with the constant back and forth.
“No, Jamal, I need it tomorrow, I have to work all day.” Jayla said, raising her voice.
“Can’t you get a ride with Madison? You literally live together.”
“No, her shift is three hours later than mine is. What is so important that you can’t just let me have it?”
“I’m going to meet Diego at the fields. We have an event for the Young Professionals and I’m the one that’s supposed to bring the card tables over!”
“Maybe you shouldn’t agree to stuff like that until you check with me then? Tell someone else they need to do it! I can’t wait to buy my own car. $1,000 short until I can get one that is safe. Just a little while longer.”
“Don’t forget about insurance. That is expensive. Why is it even required? It’s not like you’re planning on getting into an accident.”
“Yeah Jamal, that’s why they’re called accidents. The premium, the price of the insurance, is directly proportional to risk. The higher the risk, the higher the premium--and trust me, us 21-year-olds are a big risk! As are boys--at least mine will be cheaper.”
“No way!”
“Yeah, but your good grades will help you. That lowers your rates! Plus, in Florida, if you don't have insurance you can get your license plate and driving privilege suspended for up to three years. No thanks.”
“Hopefully you can get a few quotes and find one that isn’t too bad. Maybe even mom and dad will help you pay for the monthly costs.” Jamal suggested.
“No, I don’t want to ask them for help, I want to do it on my own.”
“Okay, fair. Honestly, I know we have insurance, but I don’t even know what it covers, like, what’s the point?” Jamal asked, realizing how little he knew about something that was clearly really important.
“Well, you’re right. It is kinda in-depth, but it covers a lot. There’s property damage and bodily injury liability and those cover damages to property and for people injured or killed in an accident for which you are legally responsible. It also covers your legal defense if you are sued as a result of an accident.”
“But wait, there’s more!” Jamal mocked. As a kid he loved infomercials and since, it’d been the twins’ little joke.
“You know it! There’s also uninsured motorist coverage, or UM. It includes payments for certain medical expenses, lost wages, and pain and suffering. Typically, UM coverage protects against bodily injury damages caused by an at fault uninsured motorist, a hit and run driver, and a motorist with bodily injury liability limits less than your damages.”
“Woah, that’s a lot.”
“Yeah, buckle in I’m not done. There’s also basic personal injury protection, or PIP. It’s mandatory coverage for yourself and includes protection for medical, disability, and death benefits.”
“So basically, it’s really complicated, but super important?”
“Yep” Jayla said as they pulled into Ethan’s. “You’re welcome for the info dump. I’ll gladly accept the keys tomorrow as a thank you,” she said, smirking.
Jamal rolled his eyes, knowing she wasn’t going to let it go.
“Fine.”
(Story created by Jasmine George, Ana Siqueira, Courtney Swanson and Alex Thompson)
related books
These books have a chapter directly related to this topic. Please read them for more details.
Chapter 7: Ramsey, Dave. Dave Ramsey's Complete Guide To Money. Ramsey Press, 2012.
Principle 70: Siegel, Cary. Why Didn't They Teach Me This in School?: 99 Personal Money Management Principles to Live By. CreateSpace Publishing, 2013.
Chapter 4: Orman, Suze. The Road to Wealth. Penguin Publishing Group, 2010.
additional resources
https://www.daveramsey.com/blog/how-much-car-insurance Links to an external site.
https://www.thebalance.com/overpaying-auto-insurance-4022428 Links to an external site.
https://www.annuity.org/financial-literacy/ Links to an external site.
other books
Malkiel, Burton. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing. W. W. Norton & Company, 2020.
Wood, William. Getting a Grip on Your Money: A Plain & Simple Christian Guide to Managing Personal Finances, Eliminating Debt, Spending, Saving & Giving, Investing for the Future. Intervarsity Press, 2002.
Bach, David. Smart Women Finish Rich, Expanded and Updated. Currency, 2018.
Bogle, John. The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns. Wiley, 2017.
Clason, George. The Richest man in Babylon. Dauphin Publications Inc., 2018.
Hill, Napoleon; Arthur R. Pell. Think and Grow Rich: The Landmark Bestseller Now Revised and Updated for the 21st Century. TarcherPerigee, 2005.
Lynch, Peter; John Rothchild. Beating the street. Simon & Schuster, 1994.
Kobliner, Beth. Get a Financial Life: Personal Finance in Your Twenties and Thirties. Simon & Schuster, 2017.
Orman, Suze. The 9 Steps to Financial Freedom: Practical and Spiritual Steps So You Can Stop Worrying. Currency, 2006.
Bach, David; John David Mann. The Latte Factor: Why You Don't Have to Be Rich to Live Rich. Atria Books, 2019.
Hogan, Chris. Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too. Ramsey Press, 2019.
important government sites
Federal Regulation:
(Links to an external site.) Links to an external site.The Federal Trade Commission protects consumers and competition by preventing anticompetitive, deceptive, and unfair business practices (Links to an external site.)
(Links to an external site.)Other:
Social Security Administration (Links to an external site.)
ECO 3041
ECO 3041 Personal Finance is a 3 credit hour course offered in-person and online each fall and spring semester. The purpose of the course is to provide you with the specific content knowledge of personal finance and to give you opportunities to start using that knowledge to create good habits, make better financial choices, and live a more fulfilling life. It covers material for all 33 topics listed here. See Professor Calhoun's most recent syllabus here. ECO_3041_SP21.pdf Download ECO_3041_SP21.pdf
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To schedule a presentation or an appointment with a certified peer mentor to discuss your situation email coss-financialpeermentor@fsu.edu or visit the Stavros Center financial wellness page.