10.10

What are the possible consequences of your automobile policy coverage choices?

Many states mandate minimum limits for several insurance coverages, but these limits rarely provide sufficient protection for you as the insured or for others who may be affected by your actions and decisions. Many drivers have insufficient coverageeven though their limits exceed the state minimum. Consider the consequences of Darnells insurance coverage decisions below.

Darnell has a Personal Automobile Policy (PAP) that provides liability coverage with limits of $50/100/50, no medical payment insurance, and uninsured and underinsured motorist coverage with limits of $100/300. He has collision and comprehensive coverage, both of which have a $500 deductible.

Suppose one day Darnell fails to notice a red light, causing him to blindside another car crossing the intersection. Fortunately, he is not badly injured, but the medical bill for his hospital examination nonetheless amounts to $1,938. The driver of the other car, a woman named Eleanor, suffered severe injuries from the direct impact of the accident, requiring an initial surgery, an extended hospital stay, and additional physical therapy procedures for several subsequent months. The total of her medical bills, plus compensation for being unable to work for nearly a month, totaled $135,947. Eleanors insurance company successfully filed a claim against Darnell by exercising subrogation rights.

Coverage A of Darnells plan will reimburse him for ($0, /$50,000/ $100,000/ $135,947) of Eleanors medical bills. Darnells medical bills (are covered under Part C/ are not covered by his policy/ are covered under part A).

Darnells car was relatively unharmed by the collision but required 1,200 in minor repairs. Eleanors car was destroyed, making Darnell liable for paying the $10,400 replacement value. Eleanors car was pushed up onto a nearby sidewalk on impact, destroying a nearby lawn and causing additional damage to a parked car. This damage totaled $8,693.

Darnells liability coverage also will reimburse him for up to ($20,000/$30,000/$50,000) worth of property damage. Therefore, he is responsible for paying ($0, $25,907/ $29,707) out-of-pocket in property liability damages.

Which of the following is true regarding the damage to his own car?

1-It is not covered under his policy.

2-It will be reimbursed up to the difference between his liability coverage and the damage to other property.

3-It will be reimbursed fully, minus the $500 deductible.