Download UIUC Finance 230 Assignment 3: Insurance Coverage & Claims Calculation and more Assignments Credit and Risk Management in PDF only on Docsity! UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN College of Business D E P A R T M E N T O F F I N A N C E Finance 230 Assignment 3 Fall, 2007 Due: September 14, 2007 For the following questions, assume that you have the State Farm Car Policy handed out in class, including the coverages and limits shown on the Declarations page. Also assume that the 2001 Sebring is the only car you own, unless the question indicates that you purchase another vehicle, and that any situations involving borrowing cars is done with permission, unless otherwise stated, and that you are willing to pay any additional premiums due for vehicle changes. For each situation, calculate how much your insurance policy would pay, in total. Unless otherwise indicated, assume the loss occurs during the policy period. Do not assume facts not given in the question. 1. You borrow your neighbor’s car. Your neighbor is insured with Country Insurance with the same coverages and limits you have on your policy. As your neighbor is taller than you, the seat is much further back, and you don’t take the time to adjust it. When a traffic light turns red as you approach you are unable to reach the brakes in time to stop the car, and you run the red light and hit a school bus in the intersection. Ten children are injured in the accident. Each child sues you and wins a bodily injury award of $50,000. It costs $80,000 to repair the bus, and $12,000 to repair your neighbor’s car. A. 0 B. $200,000 C. $291,200 D. $391,900 E. None of the above 2. While on a four week vacation, you rent a car. You decline the insurance coverage offered by the rental agency. On the last day of your vacation, while you are checking out of the hotel, the car with all your luggage in it is stolen and never recovered. The rental agency holds you responsible for the loss. The car had an Actual Cash Value of $28,000. Your luggage was worth $800. A. 0 B. $200 C. $28,200 D. $28,800 E. None of the above 3. You borrow your spouse's car. Your spouse has his/her own insurance with Nationwide with the same coverages and limits you have on your own policy. While driving that car, you are hit from behind by an uninsured driver and seriously injured. You incur $40,000 in medical bills and $20,000 in lost wages. You would be entitled to a bodily injury award of $140,000 if the other driver had been insured. It also costs $10,000 to repair your spouse's car. A. 0 B. $15,000 C. $125,000 D. $134,900 E. None of the above 4. Your 22 year old son John, who resides with you but is attending college away from home, borrows his roommate’s car for an errand. His roommate has a policy with Country Companies that includes liability with 20/40/15 limits, and uninsured and underinsured motor vehicle coverage, both with 20/40 limits, but no medical payments or physical damage coverage. While driving this car, John is hit from behind by an uninsured driver. John incurs $27,000 in medical bills and would be entitled to a $58,000 bodily injury award if the other driver had been insured. Also, the roommate’s car incurs damages that cost $7,400 to repair. A. 0 B. $7,300 C. $25,000 D. $45,300 E. None of the above
