Question

Tanya, 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, 2004 Toyota Corolla with a current market value of $2,000. Assume you are a financial planner and Tanya asks your advice concerning the various coverages in the PAP.

Part 1: Briefly describe the major coverages that are available in the PAP.

Part 2: Which of the available coverages in (a) should Tanya purchase? Explain your answer.

Part 3: Which of the available coverages in (a) should Tanya not purchase? Explain your answer.

Part 4: Assume that Tanya purchases the PAP coverages that you have recommended. To what extent, if any, would her insurance cover the following situations?

1. Dani, Tanya’s roommate, borrows Tanya’s car with her permission and injures another motorist. Dani is at fault.
2. Tanya is driving under the influence of alcohol and is involved in an accident where another motorist is seriously injured.
3. During the football season, Tanya charges a fee to transport fans from a local bar to the football stadium. Several passengers are injured when Tanya suddenly changes lanes without signaling and hits another car.
4. Tanya drives her boyfriend’s car on a regular basis. While driving the boyfriend’s car, she is involved in an accident in which another motorist is injured. Tanya is at fault.
5. Tanya rents a car in England where she is participating in a summer study abroad program. The car is stolen from a dormitory parking lot.

Part 5: Tanya also owns a motorcycle. To what extent, if any, does Tanya’s PAP cover the motorcycle?

Answer 1

(1) The major coverages that are available in the PAP :

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 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.
• Under Coverage for Auto DamageThere 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

(2)The following coverages are i recommended,

• Liability Coverage because she is a young college student. And because this is the most important part of the PAP
• Medical Payments Coverage because if she was to ever get in an accident that need a medical bill paid, they will pay it regardless of fault. It seems like a necessity for all drivers.
• 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.

(3) Uninsured Motorists Coverage i was not recommended because it has a lot of stipulations for a young driver and she will be insured.

(4) (a) yes Tanya 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, Tanya 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, Tanya insurance will NOT cover this, under “Medical Payments Coverage,”because Kim is using the vehicle for business (she charges a fee).

4 No, Tanya 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, Tanya 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.

(5)I would say, yes, she is covered, there is no part of the Coverage that excludes a motorcycle.