5. Computing your liability - An auto insurance example

Although car insurance is legally required by all states, the coverage provided by different policies can vary dramatically, such that even an insured motorist can end up paying large amounts of money out-of-pocket. Consider the following example involving Albert, who has a family auto policy (FAP) that provides liability coverage with limits of 15/30/15, no medical payment insurance, and uninsured and underinsured motorist coverage with limits of 1/2. He has collision and comprehensive auto insurance, both with a deductible of $100.

Suppose one day Albert rear-ends a truck when it stops while he is looking down at his radio. Fortunately, he is not badly injured, but the medical bill for his hospital examination nonetheless amounts to $484. The driver of the truck, a woman named Hannah, was unharmed but nonetheless required a hospital examination costing $864. Hannahs insurance company successfully filed a claim against Albert, exercising subrogation rights.

Coverage A of Alberts plan will reimburse him with ($0, $864, $30000) for Hannahs medical bills. Alberts medical bills are (Not Covered, Covered under coverage A, Covered under coverage B, Covered under coverage C) .

Alberts car required only a new bumper, costing $584 to replace. Hannahs truck required $3,650 in repairs, and its trailer contained a racehorse valued at $18,000 that fell and broke its legs upon the impact. Albert is therefore liable for the full value of the horse.

Alberts liability coverage also will reimburse him for up to $________

in property damage, so he is responsible for paying ($8150, $6650, $0, $7234) out-of-pocket in property liability damages. Which of the following is true regarding the damage to his own car?

[] It will be reimbursed up to the difference between his liability coverage and the damage to other property.

[] It will be reimbursed fully, minus the $100 deductible.

[] It is not covered under his policy.