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18 July, 17:30

Suppose you have just 30/60/40 liability insurance. You hit another motorist (and are at fault because you were texting) and cause $60,000 worth of damage to his 1986 Mustang. Four people were in the car. Their medical bills totaled $102,000. Your car also sustains $1,500 worth of damage and your medical bills come out to $250.

a. What does your insurance company pay? Show breakdown.

b. What are you liable to pay? Show breakdown.

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  1. 18 July, 17:53
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    You are liable to pay = $42,000 plus $20,000 plus $1,500 plus $25 = $63,525

    Explanation:

    Amount Covered by Insurance

    Medical bill upto $30,000 per person, upto a total of $60,000 for all passengers.

    P1 = $25,000

    P2 = $2,000

    P3 = $5,000

    P4 = $28,000 [Rest $42,000 for passenger 4 would come out of your pocket as the liabilities ($70,000) exceed the limit of $30,000]

    $25,000 plus $2,000 plus $5,000 plus $28,000 = $60,000

    Property Damage: Property damage limit is $40,000 hence, rest $20,000 will come out of your pocket.

    Liability insurance doesn't pay to repair or replace your car or to treat your injuries. Hence, $1,500 worth of damage and your medical bills of $25 will be borne by you too.

    Insurance Company is liable to pay = $60,000 plus $40,000 = $100,000

    You are liable to pay = $42,000 plus $20,000 plus $1,500 plus $25 = $63,525
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