Rob Worley of Richmond, Virginia, is a divorced 40-year-old loan officer at the

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. Are there any limitations on these coverages? Explain. Indicate the persons or property that would be protected under each type of coverage. What kind of insurance coverages would you recommend that Rob purchase? Explain your recommendation.

Explanation / Answer

Each of these insurances have their own pros and cons and based on the requirements, one should choose the right policy. The insurnace premiums that is payable on each will also differ based on the additonal insurance that they offer.

A. A basic automobile policy will cover the value of the car and its parts and there will be no additonal insurance on any counts and is the most basic form of insurance.

B. An uninsured motorists coverage will provide for the driver to receive damages for any injury the he received from an unisured and negligent road user in additonal to nasic policy

C.An automobile medical payments insurance covers the driver for hospitilization and medical costs in case he is injured. It will also cover the passangers of the car regarless of whose fault it is.

D. Collision isurance insuranes your car in case of damage or descruction in case of a collition with an object, another car, a bridge or a tree.

E. A Comprehensive cover insures against all possible types of damages and cover a wide an all possible insurances. However, the premium that the insuree has to pay will be very high in this case.

I would recommend a comprehensive cover. This would cover against any type of damage or injury and will have the greatest claim settlement ratio. The flip side would be higher costs. Consider that this is Rob's only car and he uses it for all purposes, I would recommend this policy to him.

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