David Salter has a personal automobile policy ( PAP) with coverage of $ 25,000/$ 50,000 for bodily injury liability, $ 25,000 for property damage liability, $ 5,000 for medical payments, and a $ 500 deductible for collision insurance. How much will his insurance cover in each of the following situations? Will he have any out- of- pocket costs? a. David loses control and skids on ice, running into a parked car and causing $ 3,785 damage to the unoccupied vehicle and $ 2,350 damage to his own car. b. David runs a stop sign and causes a serious auto accident, badly injuring two people. The injured parties win lawsuits against him for $ 30,000 each. c. David’s 18- year- old son borrows his car. He backs into a telephone pole and causes $ 450 damage to the car.
To determine the amount of coverage David's insurance will provide in each situation and whether he will have any out-of-pocket costs, we will need to examine the specifics of his insurance policy. Let's break down the questions one by one:
a. David loses control and skids on ice, running into a parked car and causing $3,785 damage to the unoccupied vehicle and $2,350 damage to his own car.
For property damage liability, David's insurance policy provides coverage up to $25,000. Since the total damage caused to the unoccupied vehicle is $3,785, the insurance will cover the full amount. However, for the damage caused to his own car ($2,350), David will need to pay the $500 deductible himself, and the remaining $1,850 will be covered by the insurance.
b. David runs a stop sign and causes a serious auto accident, badly injuring two people. The injured parties win lawsuits against him for $30,000 each.
For bodily injury liability, David's policy provides coverage up to $25,000 per person and $50,000 per accident. Since each injured party is claiming $30,000 in lawsuits, David's insurance will only cover up to the policy limit of $25,000 per person. As a result, the insurance will cover $25,000 for each injured person, totaling $50,000. However, since the claim amount exceeds the policy limit, David will be responsible for the remaining $10,000 ($30,000 - $25,000) for each injured person. Therefore, David will have an out-of-pocket cost of $20,000 ($10,000 x 2) in this situation.
c. David’s 18-year-old son borrows his car. He backs into a telephone pole and causes $450 damage to the car.
For property damage liability, David's policy provides coverage up to $25,000. Since the damage caused to the car is $450, the insurance will cover the full amount. Therefore, David will not have any out-of-pocket costs in this situation.
In summary:
a. Insurance coverage: $3,785 for the unoccupied vehicle & $1,850 for his own car. David will have an out-of-pocket cost of $500 (deductible) for his own car.
b. Insurance coverage: $50,000. David will have an out-of-pocket cost of $20,000.
c. Insurance coverage: $450. David will not have any out-of-pocket costs.