Question

Marc Rose has a PAP with coverage of $50,000/$100,000 for bodily injury liability, $50,000 for property damage liability, $3,000 for medical payments, and a $1,000 deductible for collision insurance. How much will his insurance cover in each of the following situations? Will he have any out-of-pocket costs? Round your answer to the whole dollar, if necessary. Leave no cells blank, be sure to enter "0" wherever required.

1. Marc loses control and skids on ice, running into a parked car and causing $3,690 damage to the unoccupied vehicle and $2,065 damage to his own car.

   Total paid by the insurance company	$
   Marc's out-of-pocket costs	$

2. Marc runs a stop sign and causes a serious auto accident, badly injuring two people. The injured parties win lawsuits against him for $23,000 each.

   Total paid by the insurance company	$
   Marc's out-of-pocket costs (for both victims)	$

3. Marc's 18-year old son borrows his car. He backs into a telephone pole and causes $250 damage to the car.

   Total paid by the insurance company	$
   Marc's out-of-pocket costs	$

Answer 1

Figures in bold and underlined are your final answers.

Part (a)

Total damages = $ 3,690 + $ 2,065 = 5,755

Note that the insurance PAP has a $ 1,000 deductible for collision insurance.

Hence, Total paid by the insurance company = 5,755 - 1,000 = $ 4,755
Marc's out-of-pocket costs: $ 5,755 - 4,755 = $ 1,000

Part (b)

Insurance has coverage of $50,000/$100,000 for bodily injury liability. This means $ 50,000 per person injured or $ 100,000 per accident. Anything in excess will be borne by Marc.

Total claim under lawsuit = $ 23,000 each = 23,000 x 2 = 46,000 < 100,000

Hence, Total paid by the insurance company: $ 46,000
Marc's out-of-pocket costs (for both victims): $ 0

Part (c)

Damage to the car = $250 < $ 1,000 deductible for collision insurance

Hence, Total paid by the insurance company: $ 0
Marc's out-of-pocket costs : $ 250