Understanding Collision Coverage in Auto Insurance
Question:
Which of the following statements is TRUE based on the given data?
A. Collision coverage will not indemnify Hank for this accident
B. Hank will be indemnified by his insurer for $23,000
C. Hank will be indemnified by his insurer for $25,000
D. Hank will be indemnified by his insurer for $43,000
Final answer:
Answer:
The correct answer is A. Collision coverage will not indemnify Hank for this accident.
Explanation:
Collision coverage is an important aspect of auto insurance that helps policyholders cover the costs of damages to their vehicle in case of a collision, regardless of who is at fault. In the given scenario, Hank has collision coverage with a $2,000 deductible on his 2010 truck. When Hank's truck slips off the road and rolls down the embankment, it sustains $45,000 in damages.
However, the actual cash value of Hank's truck is only $25,000. Since the damages exceed the actual cash value of the vehicle, Hank will not be indemnified by his insurer for this accident. This is because the claim amount ($45,000) does not exceed the deductible amount ($2,000).
In conclusion, Hank will not receive indemnification for the damages to his truck as the claim amount is higher than the actual cash value of the vehicle and the deductible amount required by his collision coverage.