PFIN 5th Edition by Randall Billingsley,Lawrence Gitman,Michael Joehnk

Exercise 5

Evaluating personal automobile policy features. Cooper Gamboa of Denver, Colorado, is a single, 40-year-old loan officer at a large regional 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 September, Cooper visits Smitham motors and buys a new car for $32,000. To obtain insurance on the car, he calls his agent, Kate Hillman, who represents Grey's Insurance Agency, and explains his auto insurance needs. Kate says that she'll investigate the various options for him. Three days later, Cooper and Kate get together to review his coverage options. Kate offers several proposals, including various combinations of the following coverages: (i) basic automobile liability insurance, (ii) uninsured motorists coverage, (iii) automobile medical payments insurance, (iv) automobile collision insurance, and (v) comprehensive automobile insurance.
a. Describe the key features of these insurance coverages.
b. Are there any limitations on these coverages? Explain.
c. Indicate the persons who would be protected under each type of coverage.
d. What kind of insurance coverages would you recommend that Cooper purchase? Explain your recommendation.