Auto Insurance - Assignment 10 (1)

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Nov 24, 2024

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Assignment 10 Read chapter 20 & 21 then work on the following case applications. Use concepts from the chapters. Textbook: https://drive.google.com/file/d/1D_zCwuDVAg5Qxja1yX0pAjWuwDFYpSCL/v iew?usp=drive_link CH. 20 – Auto-Insurance Case Application – Answer all questions in 1200 words Tanya, age 21, is a college student who recently purchased her first car from a friend who had financial problems. The vehicle is a high-mileage, 2006 Toyota Corolla with a current market value of $3,000. Assume you are a financial planner and Tanya asks your advice concerning the various coverages in the PAP. a. Briefly describe the major coverages that are available in the PAP. b. Which of the available coverages in (a) should Tanya purchase? Justify your answer. c. Which of the available coverages in (a) should Tanya not purchase? Justify your answer. d. Assume that Tanya purchases the PAP coverages that you have recommended. To what extent, if any, would her insurance cover the following situations? 1. Dani, Tanya’s roommate, borrows Tanya’s car with her permission and injures another motorist. Dani is at fault. 2. Tanya is driving under the influence of alcohol and is involved in an accident where another motorist is seriously injured. 3. During the football season, Tanya charges a fee to transport fans from a local bar to the football stadium. Several passengers are injured when Tanya suddenly changes lanes without signaling and hits another car. 4. Tanya drives her boyfriend’s car on a regular basis. While driving the boyfriend’s car, she is involved in an accident in which another motorist is injured. Tanya is at fault. 5. Tanya rents a car in England where she is participating in a summer study abroad program. The car is stolen from a dormitory parking lot. e. Tanya also owns a motorcycle. To what extent, if any, does Tanya’s PAP cover the motorcycle? Ch. 21 - Auto-Insurance

Case Application – Answer all questions [2 pages] Paige, age 26, has purchased a new Ford sedan. She has a clean driving record. Collision coverage on the car in a small midwestern city where she lives would cost approximately $650 every six months with a $250 deductible, $480 with a $500 deductible, and $360 with a $1,000 deductible. The state has a compulsory insurance law that requires minimum liability limits of $25,000/$50,000/$25,000. Paige would like to purchase collision insurance with a $250 deductible because the out-of- pocket cost to repair her car in an accident where she is at fault would be relatively small. She wants to purchase the minimum liability limits, because she has few financial assets to protect. Paige is also concerned that she might be seriously injured by a driver who has no insurance. Assume that Paige asks your advice concerning her auto insurance coverages. Based on the given facts, answer the following questions. a. Paige wants to know why auto insurance costs so much. Explain to her the factors that determine auto insurance rates. b. Do you recommend that Paige purchase collision insurance with a $250 deductible? Explain your answer. c. Do you agree with Paige that only minimum liability limits should be purchased because she has few financial assets to protect? Explain your answer. d. Assume that Paige adds uninsured motorists coverage to her policy. Would she be completely protected against the financial consequences of a bodily injury caused by an uninsured driver? Explain your answer. e. Paige would like to reduce her auto premiums because her monthly car payments are high. Explain to Paige the various methods for reducing or holding down auto insurance premiums.

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