Answers26-27 Ignite Financial Literacy Personal Finance - EL3403Auto Insurance

Auto Insurance Answers

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1
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Tom is considering making changes to his policy to make insurance more affordable. Which of the following statements is not something Tom should consider when making changes to his policy?

A
Increasing the deductible on collision insurance will reduce his overall monthly and annual expense, but will lead to more out-of-pocket expense if he is in a collision.
B
Removing comprehensive insurance will reduce his overall expense, but will leave Tom entirely responsible for the cost of a new windshield if he hits a rock on the highway.
C
Increasing the limits on his bodily injury insurance will reduce his overall expense by putting greater limits on how much the insurance company will pay for injuries.
D
Removing property damage insurance will reduce his overall expense, but will leave Tom responsible for the cost of repairs to any other cars involved with Tom in a collision.
2
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Because of an accident Royce was involved in, his insurance company has increased his annual premium for auto insurance by 5.2%. His original policy was set up using the premiums listed below. What is his new annual premium after the increase for the accident?Royce's Auto Insurance Policy Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/$50,000$22.50 Property Damage$50,000 $144.75 Collision$500 deductible$275.75 Comprehensive$100 deductible$100.00

A
$514.76
B
$543.00
C
$548.20
D
$571.24
3

Jerry is currently insured through AA Auto Insurance, but would like to lower his auto insurance premium by at least $10 per month. His current insurance plan includes the $50/100,000 limit for bodily injury, $100,000 limit for property damage, a $250 deductible for collision, and a $50 deductible for comprehensive. Which of the following adjustments would allow Jerry to meet his goal?AA Auto Insurance Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/$50,000$22.50 $50/100,000$31.75 $100/300,000$40.25 Property Damage$25,000 $120.50 $50,000 $144.75 $100,000 $193.00 Collision$100 deductible$520.00 $250 deductible$415.25 $500 deductible$275.75 Comprehensive$50 deductible$110.25 $100 deductible$100.00

A
Reduce bodily injury limits to $25/50,000.
B
Reduce property damage to $25,000.
C
Increase collision deductible to $500.
D
Increase comprehensive deductible to $100.
4

The auto insurance plans available from Fret-No-More Auto Insurance are outlined in the table below. To be considered “full” coverage, an insurance plan must include one level of coverage from each category. What is the annual premium for the cheapest insurance plan available from Fret-No-More that is considered full coverage?Fret-No-More Auto Insurance Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/50,000$21.35 $50/100,000$32.78 $100/300,000$42.10 Property Damage$25,000 $115.50 $50,000 $142.44 $100,000 $193.78 Collision$100 deductible$490.25 $250 deductible$343.33 $500 deductible$248.08 Comprehensive$50 deductible$105.79 $100 deductible$88.23

A
$473.16
B
$490.72
C
$715.33
D
$732.89
5

Tom is considering making changes to his policy to make insurance more affordable. Which of the following statements is not something Tom should consider when making changes to his policy?

A
Increasing the deductible on collision insurance will reduce his overall monthly and annual expense, but will lead to more out-of-pocket expense if he is in a collision.
B
Removing comprehensive insurance will reduce his overall expense, but will leave Tom entirely responsible for the cost of a new windshield if he hits a rock on the highway.
C
Increasing the limits on his bodily injury insurance will reduce his overall expense by putting greater limits on how much the insurance company will pay for injuries.
D
Removing property damage insurance will reduce his overall expense, but will leave Tom responsible for the cost of repairs to any other cars involved with Tom in a collision.
6

The table below lists the insurance options offered by AA Auto Insurance. Calculate the monthly payment for an insurance plan including the following options:Bodily Injury: $50/100,000Property Damage: $100,000Collision: $500 deductibleComprehensive: $100 deductibleAA Auto Insurance Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/$50,000$22.50 $50/100,000$31.75 $100/300,000$40.25 Property Damage$25,000 $120.50 $50,000 $144.75 $100,000 $193.00 Collision$100 deductible$520.00 $250 deductible$415.25 $500 deductible$275.75 Comprehensive$50 deductible$110.25 $100 deductible$100.00

A
$50.04
B
$50.90
C
$54.31
D
$68.73
7

The annual insurance premium for a car Nicole bought 6 months ago is $756.00 with a $500 deductible for collision. Nicole had just paid the bill for her sixth month of insurance before she was involved in a car accident resulting in $2,000 in damage to her car. Because she had collision insurance in her policy, the insurance company took care of all of the repairs less the $500.00 deductible. Considering how much she paid in insurance premiums and deductibles, would you say the purchase of insurance over the last 6 months was a good investment for Nicole? Why or why not?

Answer:

Yes. Nicole paid $878 in premiums and deductible, while the insurance company covered $1,500 of the $2,000 repair cost. Therefore, the insurance saved her $622 compared with paying the full repair cost herself, making it a good investment over the six months.

8

Ned’s truck was caught in a hailstorm that left his truck body damaged and his paint job ruined. Ned is fully insured through his insurance company. Which of the following components of Ned’s insurance policy will take care of the damage done to Ned’s truck during the hailstorm?

A
bodily injury
B
property damage
C
collision
D
comprehensive damage
9

In an effort to reduce cost on auto insurance, Sophia has lowered each component of her current plan to the cheapest possible option. Sophia’s current insurance agency is Fret-No-More Auto Insurance, whose policy options are listed below. The annual premium for Sophia’s current policy is $511.31. What decrease in her annual premium will Sophia see after the change?Fret-No-More Auto Insurance Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/50,000$21.35 $50/100,000$32.78 $100/300,000$42.10 Property Damage$25,000 $115.50 $50,000 $142.44 $100,000 $193.78 Collision$100 deductible$490.25 $250 deductible$343.33 $500 deductible$248.08 Comprehensive$50 deductible$105.79 $100 deductible$88.23

A
$20.59
B
$38.15
C
$57.10
D
$60.88
10

For the past 16 months, Susie has been paying $126.50 each month to her insurance company. After causing an accident last month, her insurance company notified her that her monthly payment will be increased by $21.25. What increase in her annual premium did Susie’s insurance company apply as a result of the accident?

A
$21.25
B
$125.60
C
$147.75
D
$255.00
11

In auto insurance, a higher deductible means the customer _____.

A
has a higher monthly bill, but pays less out of pocket in the event of an accident.
B
has a lower monthly bill, but pays more out of pocket in the event of an accident.
C
has a higher monthly bill and pays more out of pocket in the event of an accident.
D
has a lower monthly bill and pays less out of pocket in the event of an accident.
12

In an effort to reduce cost on auto insurance, Sophia has lowered each component of her current plan to the cheapest possible option. Sophia’s current insurance agency is Fret-No-More Auto Insurance, whose policy options are listed below. The annual premium for Sophia’s current policy is $511.31. What decrease in her annual premium will Sophia see after the change?Fret-No-More Auto Insurance Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/50,000$21.35 $50/100,000$32.78 $100/300,000$42.10 Property Damage$25,000 $115.50 $50,000 $142.44 $100,000 $193.78 Collision$100 deductible$490.25 $250 deductible$343.33 $500 deductible$248.08 Comprehensive$50 deductible$105.79 $100 deductible$88.23

A
$20.59
B
$38.15
C
$57.10
D
$60.88
13

Because of an accident Royce was involved in, his insurance company has increased his annual premium for auto insurance by 5.2%. His original policy was set up using the premiums listed below. What is his new annual premium after the increase for the accident?Royce's Auto Insurance Policy Type of Insurance CoverageCoverage LimitsAnnual PremiumsBodily Injury $25/$50,000$22.50 Property Damage$50,000 $144.75 Collision$500 deductible$275.75 Comprehensive$100 deductible$100.00

A
$514.76
B
$543.00
C
$548.20
D
$571.24

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