Rob Worley of Richmond, Virginia, is a divorced 40-year-old loan officer at the
ID: 2710855 • Letter: R
Question
Rob Worley of Richmond, Virginia, is a divorced 40-year-old loan officer at the Dominion Bank; he has a 16-year-old son. He has decided to use his annual bonus as a down payment on a new car. One Saturday afternoon in late December, he visits University Auto Mall and buys a new car for $28,000. To obtain insurance on the car, Rob calls his agent, Karen Cunningham, who represents Charter Insurance Company, and explains his auto insurance needs. Karen says she’ll investigate the various options for him. Three days later, Rob and Karen get together to review his coverage options. Karen offers several proposals, including various combinations of the following coverages: (a) basic automobile liability insurance, (b) uninsured motorists coverage, (c) automobile medical payments insurance, (d) automobile collision insurance, and (e) comprehensive automobile insurance.
Objectives • Describe the key features, policy limits and persons insured of 5 important car insurance. • Apply what you have learned on automobile insurance to real life saturation. Questions
1. Describe the key features of these insurance coverages: (a) basic automobile liability insurance, (b) uninsured motorists coverage, (c) automobile medical payments insurance, (d) automobile collision insurance, and (e) comprehensive automobile insurance. There are 5 types of insurance, each is worth 10 points. 50 points
2 Are there any limitations on these coverages? Explain. There are 5 types of insurance, each is worth 3 points.
3. Indicate the persons or property that would be protected under each type of coverage. There are 5 types of insurance, each is worth 3 points.
4. What kind of insurance coverages would you recommend that Rob purchase? Explain your recommendation.
Explanation / Answer
Liability insurance pay for medical expenses and automotive repairs of others involved in an accident that is determined to be your fault. Basic liability insurance, however, does not do the same for you or your vehicle. While this form of insurance saves money on premiums, there is a distinct disadvantage in the lack of coverage. While it is comforting to know that the other party will be taken care of, an accident could still leave you without an automobile and with big medical bills. The policy will also have a maximum payout, and any damages beyond that will be your responsibility.
I would recommend Bob to purchase a combination of liability, collision and medical payments insurance since it provides adequate cover against major liabilities.
Particulars 1. Expensive 2. Vague Terms Uninsured motorists coverage Automobile medical payments insurance Automobile collision insurance Comprehensive automobile insurance Key features There are two basic components of liability car insurance: bodily injury coverage and property damage coverage.a) Bodily injury liability coverage
Bodily injury liability coverage may help pay the costs if people are injured or killed in a covered accident you cause. This may include medical expenses, loss of income and, in some cases, legal fees if you are sued.
b) Property damage liability coverage
Property damage liability insurance helps pay for other people’s property, not yours. It may cover damage done to someone’s property as the result of a covered accident for which you are responsible. It may also help cover the expense of repairing or replacing a car, fence or other property damaged during the covered incident. Uninsured motorist insurance may help protect you against drivers who don’t have liability insurance or lack the money to pay for injuries and damages they cause to you, your passengers or your car. This coverage is often paired with underinsured motorist coverage, which is similar, but for situations where the other driver’s insurance will pay for some of the damages. It can also protect you from covered hit and run accidents subject to policy coverage provisions and limits.
There are two basic components of uninsured motorist coverage. Uninsured motorist property damage (UMPD) coverage pays for covered damages to your car or other property. Uninsured motorist bodily injury (UMBI) coverage pays for covered medical expenses, lost wages and other damages experienced by you or your passengers in a covered accident.
Uninsured motorist coverage may cover you outside your car. This coverage helps pay medical costs for you and your passengers in the event of a covered auto accident. This may include hospital and ambulance bills, as well as doctor visits and other necessary medical treatments.
If you have a covered accident while a friend is riding in your car and his arm is broken, your medical payments coverage may reimburse him for his medical expenses subject to your policy coverage limits. Collision insurance covers damage to your vehicle in the event of a covered accident. Unlike liability insurance, which may cover damage to other vehicles or property, collision auto insurance may help to repair or replace your covered vehicle.
The combination of a liability insurance policy and collision coverage will help reduce the risk of having to pay for repairs out of pocket in some vehicle accident situations, after your deductible payment.
While collision may not be required by law, it’s a smart coverage for vehicle owners. Additionally, most banks and car dealerships require collision coverage for financed or leased vehicles. Comprehensive car insurance coverage pays for damage caused by covered events other than a collision with another vehicle, such as vandalism or hail damage. Without comprehensive insurance, you may have to pay to repair these kinds of damages to your car, which can outweigh the price of your policy.
A comprehensive car insurance policy may include coverage for:
• A cracked or broken windshield, depending on the state in which you live
• Damage from hitting a deer or other animal
• Car theft insurance in the event your vehicle is stolen or damaged by covered car vandalism
• Damages caused by some events outside of human control, such as hail or other natural disasters
• Damage caused by certain falling objects, such as tree branches or debris
• Damages resulting from fires, civil commotions or explosions
It’s easy to customize your comprehensive insurance policy with a variety of endorsements, all designed to make your life easier, such as:
• Collision coverage
• Towing and Labor
• Rental Reimbursement Policy limits A limit is the maximum dollar amount your insurance may pay per event. For example, if you have a property damage limit of $10,000 and cause $15,000 in damages in a covered accident, you are responsible for the excess $5,000.
If you carry only the state-minimum required liability car insurance with the lowest limits and you’re responsible for a bad covered accident, you would have to pay the balance of the claims that exceed your policy limits. Minimum UM insurance limits must conform to state minimum limits for mandated liability insurance. For example, the state of California minimum liability limits are $15,000 for bodily injury to one person per accident, $30,000 for bodily injury to all people in an accident and $5,000 property damage (15/30/5). The minimum allowable UM coverage in California is therefore $15,000. Since liability minimums vary by state, minimum UM insurance will also vary. Maximum UM limits cannot exceed the limit of the insured’s own liability insurance. If the insured’s liability insurance is 100/200/50, the maximum UM/UIM limit is $100,000. Medical payments and personal injury protection available limits vary greatly from state to state. You need to buy at least the minimum amounts for your state.
Collision coverage comes with a deductible. This means you'll pay out of pocket for some of the damage, and any amount after that is typically covered up to the actual cash value of your car. Comprehensive coverage is limited by the market value of your vehicle. Your policy may not cover the full cost of the damage if it is greater. If your vehicle is worth $5,000 but has $10,000 worth of hailstorm damage, you'll only be eligible for $5,000. Comprehensive coverage is also subject to deductibles. Persons insured If you opt for liability car insurance alone, you’re legally covered, but damage to your vehicle isn’t. It cover's damage to other vehicles or property Insurance policy that provides for a insured driver to receive damages for any injury he or she receives from an uninsured, negligent driver. This coverage helps pay medical costs for you and your passengers in the event of a covered auto accident. Collision insurance covers damage to your vehicle in the event of a covered accident. Comprehensive car insurance coverage pays the insured for damage caused by events other than a collision with another vehicle. Limitations
Liability insurance pay for medical expenses and automotive repairs of others involved in an accident that is determined to be your fault. Basic liability insurance, however, does not do the same for you or your vehicle. While this form of insurance saves money on premiums, there is a distinct disadvantage in the lack of coverage. While it is comforting to know that the other party will be taken care of, an accident could still leave you without an automobile and with big medical bills. The policy will also have a maximum payout, and any damages beyond that will be your responsibility.
1. Expensive 2. Vague Terms 1. Expensive 2. Vague Terms The most obvious disadvantage to collision insurance is that it carries a higher cost than other insurance options. The cost is prohibitive for many people. In some cases, the cost is raised by extras that are bundled into the policy. 1. Expensive 2. A lot of extras - another feature of comprehensive auto insurance is that it tends to include a lot of extra features that buyers will end up paying for. 3. Over hyped policies 4. Other alternatives - some drivers may not know that you don't need comprehensive auto insurance to cover basic damages to your vehicle.Related Questions
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