Chapter 10

Financial Planning Exercise 6

Personal automobile policy coverage

Zachary Lee has a personal automobile policy (PAP) with coverage of $15,000/$30,000 for bodily injury liability, $15,000 for property damage liability, $2,000 for medical payments, and a $500 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.

a. Zachary loses control and skids on ice, running into a parked car and causing $4,320 damage to the unoccupied vehicle and $4,375 damage to his own car.

Total paid by the insurance company $ ____________

Zachary's out-of-pocket costs $__________________

b. Zachary runs a stop sign and causes a serious auto accident, badly injuring two people. The injured parties win lawsuits against him for $20,000 each.

Total paid by the insurance company $_____________

Zachary's out-of-pocket costs (for both victims) $ _____________

c. Zachary's 18-year-old son borrows his car. He backs into a telephone pole and causes $275 damage to the car.

Total paid by the insurance company $ _________________

Zachary's out-of-pocket costs $_______________________