Auto Insurance Homework Questions

For each of the following situations, determine what is covered by the personal auto policy. Indicate what part of the policy covers the loss and how much will be paid by the insurance company. If the situation is not covered, clearly indicate why it is not. Use the auto policy in the appendix to your textbook. Use the coverage amounts shown in the declarations page. (If the declarations page is not available, use the coverage amounts given below.) Note that the insurance covers two vehicles, a Toyota Corolla and a Ford Taurus. The owners of the vehicles are Chris and Karen Swift. Assume they have two children, Mary, age 17, a licensed driver living at home, and Bob, age 15, not a licensed driver, also living at home. Chris is driving the Toyota and causes an accident because he is speeding and texting at the same time. He crashes into another car and injures two people. The first person has medical bills of $125,000 and the second person has medical bills of $80,000. The other car is severely damaged and will cost $8,000 to repair. The actual cash value of the other car is $5,000. The Toyota is also damaged. The Toyota will cost $2,000 to repair. The actual cash value of the damage to the Toyota is $1,000. Chris has minor injuries resulting in medical bills of $800.

Karen is a sales associate for a major drug company. She uses the Ford for business travel as she must visit pharmacies within 200 miles of her home. As she is driving to one of the pharmacies for a work appointment, another vehicle hits the Ford and the driver speeds away. Karen calls the police, but the other driver is never found. Karen sustains multiple injuries and the medical bills equal $40,000. The Ford is damaged and will cost $3,000 to repair. The actual cash value of the damage is $1,800.

Mary has a date with her boyfriend, John, and lets him drive the Ford Taurus. John runs a red light and hits another car. John is sued for damages of $25,000 for bodily injury and $15,000 for damage to the other car. The actual cash value of the damage is $10,000. The Ford Taurus is damaged and will cost $4,000 to repair with an actual cash value of $3,000. Both Mary and John suffer minor injuries. Johns medical bills are $700, and Marys medical bills are $500.

Chris is late for work one morning and the Toyota wont start. Karen has already left in the Ford, so Chris askes his neighbor if Chris can borrow the neighbors truck to get to work. Chris is involved in an accident while driving the truck, hitting a pedestrian, who requires $12,000 in medical bills. The truck is also damaged. The truck will cost $1,200 to repair with an actual cash value of $900. The neighbor has no insurance on the truck.

Karen and her friend Jane like to go to the park together and take turns driving. Jane picks up Mary and drives them to the park, but Jane breaks her glasses, so Karen drives them home in Janes Honda. The Honda is covered by an auto insurance policy with liability limits of $50,000/$100,000/$$25,000 but no Coverage D. Karen causes an accident while driving Janes Honda and is sued for bodily injury to the other drive in the amount of $75,000 and damage to the other drivers car in the amount of $6,000 (actual cash value $3,000).

Mary is driving the Ford Taurus when a deer runs out of the woods and crashes into the car. Damage is extensive, costing $2,800 to repair (actual cash value of $1,800). The impact also results in a flat tire. Mary changes the tire along side the road but loses control of the lug wrench and further damaging the car. The damage caused by the lug wrench will cost an additional $800 to fix (actual cash value of $600).

Chris and Karen take Mary to look for a Prom dress in the Toyota. Bob decides to take the Ford for a drive while everyone else is away. Bob drives around the neighborhood for a while and then heads home. Bob is making a left-hand turn onto his street when he sees his father coming the other direction, about to make a right-hand turn onto the same street. Bob panics and speeds in front of his father, hitting the front of the Toyota on his way by. Bob loses control and hits a parked car on the street. The Toyota has damage of $2,000 (actual cash value $1,200), the parked car has damage of $3,000 (actual cash value $1,900), and the Ford has damage of $2,300 (actual cash value $1,300). Bob also suffers minor injuries requiring $400 in medical bills.

Declarations Page Coverage Limits:

Toyota: Coverage A Bodily Injury Liability $100,000 Each Person/$300,000 Each Accident

Coverage A Property Damage Liability $50,000 Each Accident

Coverage B Medical Payments $5,000 Each Person

Coverage C Uninsured Motorists $100,000 Each Person/$300,000 Each Accident Bodily Injury

Ford: Coverage A Bodily Injury Liability $100,000 Each Person/$300,000 Each Accident

Coverage A Property Damage Liability $50,000 Each Accident

Coverage B Medical Payments $5,000 Each Person

Coverage C Uninsured Motorists $100,000 Each Person/$300,000 Each Accident Bodily Injury

Coverage D Other Than Collision Actual Cash Value less $250 Collision Actual Cash Value less $500