Chapter 22 23

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Chapter 22:

Kim, age 20, is a college student who recently purchased her first car from a friend who had

financial problems. The vehicle is a high mileage, 2001 Toyota Corolla with a current market

value of $2000. Assume you are a financial planner and Kim asks your advice concerning

the various coverage's in the PAP.

Answer a

PAP consists of liability coverage, medical payments coverage, uninsured motorist coverage, and

coverage for damage to your auto.

1. Liability coverage will protect a covered person against a lawsuit or claim arising out of the

ownership or operation of a covered vehicle.

2. Under medical payments coverage the insurance company will pay all reasonable medical and

funeral expenses incurred by the insured for services rendered within three years of the date of an

accident.

3. Uninsured Motorists Coverage will cover the insured if they suffer damages from uninsured

motorists, which are defined as drivers without insurance, drivers with less than the required

amount, hit-and-run drivers, and drivers insured by insolvent insurance companies.

4. Under Coverage for Auto Damage: There are 2 different types of coverage for your auto:

collision and other-than-collision, or what is sometimes called :-

• comprehensive coverage. Collision coverage covers any damage caused by a collision with

another vehicle or object.

• Other-than-collision coverage covers damage from anything else, which includes missiles or

falling objects; fire; theft or larceny; explosion or earthquake; windstorm; hail, water or flood.

•

Answer b

I recommend that she purchase the following coverages:-

1. Liability Coverage because she is a young college student. And because this is the most

important part of the PAP

2. Medical Payments Coverage because if she was to ever get in an accident that needed a medical

bill paid, they will pay it regardless of fault. It seems like a necessity for all drivers.

3. Coverage for Damage to your auto because it provides coverage for the damage or theft of an

auto. And as a young driver, not saying that she is irresponsible, but things happen.

Answer c

I don’t recommend her getting Uninsured Motorists Coverage because it has a lot of stipulations

for a young driver and she will be insured.

Answer d

1. Yes, Kim’s insurance will cover this, under " Medical Payments Coverage” because the

exclusion only applies if the vehicle was used without a reasonable belief of permission. And in

this case, Danielle had Kim’s permission to use the vehicle.

2. Yes, Kim’s insurance will cover this, under “Medical Payments Coverage” which states that

“medical payments are made without regard to fault.” In this case, Kim who was at fault will not

have to cover the other motorist’s medical bill.

3. No, Kim’s insurance will NOT cover this, under “Medical Payments Coverage,”because Kim

is using the vehicle for business (she charges a fee).

4. No, Kim’s insurance will NOT cover this, his insurance will have to cover this. She was not in

her vehicle, so her coverage does not extend over to his vehicle.

5. Yes, Kim’s insurance will cover this, under “ Coverage for Damage to your Auto.”Under Part

D, there is a non owned auto clause that covers non owned auto vehicles.

Answer e

Kim’s motorcycle would be excluded in Part A and Part B coverages, but would still be covered

by Part C and Part D Coverages. A motorcycle would be excluded because it is considered a

motorized vehicle with fewer than four wheels. Any bodily injury while occupying a motorized

vehicle with fewer than four wheels limits the coverages Kim is eligible to. Occupying is defined

in the policy as “in, upon, or getting in, on, out or off.”

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Chapter 22: Kim, age 20, is a college student who recently purchased her first car from a friend who had financial problems. The vehicle is a high mileage, 2001 Toyota Corolla with a current market value of $2000. Assume you are a financial planner and Kim asks your advice concerning the various coverage's in the PAP. Answer a 1. 2. 3. 4. • • PAP consists of liability coverage, medical payments coverage, uninsured motorist coverage, and coverage for damage to your auto. Liability coverage will protect a covered person against a lawsuit or claim arising out of the ownership or operation of a covered vehicle. Under medical payments coverage the insurance company will pay all reasonable medical and funeral expenses incurred by the insured for services rendered within three years of the date of an accident. Uninsured Motorists Coverage will cover the insured if they suffer damages fr ...
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