1-4. Tyler just wrecked his new Nissan, and the accident was his fault. The owne
ID: 2816804 • Letter: 1
Question
1-4. Tyler just wrecked his new Nissan, and the accident was his fault. The owner of thc other vehicle got two estimates for the repairs: one was for $803 and the other was for $852. Tyler is thinking of keeping the insurance companies out of the incident to keep his driving record "clean." Tyler's deductiple on his comprehensive coverage insurance is $500, and he does not want his premium to increase because of the accident. In this regard, Tyler estimates that his semi-annual premium will rise by S60 if he files a claim against his insurance company. In view of the above information, Tyler's initial decision is to write a personal check for $803 payable to the owner of the other vehicle. Did Tyler make the most economical decision? What other options should Tyler have explored? In your answer, be sure to state your assumptions and quantify your thinking, (1.3)Explanation / Answer
Tyler has two options
1- Write a personal check for $ 803
2- Claim to the insurance company.
Analysis of the case in option 1- If he opt for the personal check to the owner then the cost is $803.
Analysis of the 2nd option - the cost of claiming to the insurance company is $60*10+ (803-500) =$903.
So in the first option tyler has to pay less and hence economical.
Assumption : Ignoring the time value
Assumption : Tyler will keep the car for next 5 years
Tyler must opt for first option i.e. to write a personal check to the owner because of two reasons. First its economical and secondly it will keep his record clean.
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