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

Exercise 6

Personal automobile policy coverage. Logan Reaves 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. Logan 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. Logan 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. Logan's 18-year-old son borrows his car. He backs into a telephone pole and causes $450 damage to the car.