Dear Class,
As you can see... late nights during finals week aren't just for the
students. The TAs and I are putting in the long hours to get the
final ready for you on Tuesday, hopefully your studying is going well.
1st order of business: Review Session
Sun. 3/19 7pm - 9pm 1322 Storer Hall (sorry no fancy visual aid
campus map this time)
The TAs will be going over the sample final, along with any
questions that you have from anything during the quarter.
2nd order of business: Materials for the Final
You'll need the same scantron and a no.2 pencil for the Final, just
like you needed for the midterm. Please remember your calculators as
well, and if you're using a calculator with more than one row of text
(ie. graphing calculator) please sit in the first 2 rows of the class.
Final order of business: Auto Insurance Notes & Examples.
· Auto insurance is actually several types of insurance packages
grouped together. You can adjust the coverage of each to best suit
your needs.
(Laid out well and described on pg. 412 of the book, you don't need
to read the book for Auto Insurance, but pg412 has a pretty good
summary)
· Part A is Liability – Most important in this class.
* Pays damages for bodily injury and/or property damage for which
you’re legally responsible due to an accident.
* Settles or defends any claim or suit asking for such damages.
* Only covers legal fees for civil charges.. no criminal charges
(such as drunk driving accidents, etc. the insurance isn't going to
pay for your fines to the state/ county, instead it just pays for the
people who you've damaged)
* Typical liability policy limits are $50K, $100K, $300K, $500K.
It is advisable that you should consider nothing lesss than $300,000
in coverage in today’s legal liability environment. (remember, it
doesn't take much in damage to be sued for $100k + these days)
* Damage awards by the courts are increasing, and the insurance
company's duty to defend you ends when the coverage limit has been
exhausted, leaving you to pay for the rest.
* In short – don’t pay attention to the legal minimums.. instead,
insure for what you need coverage for.
* Typical liability policy limits will look something like $100/$300/
$50 when quoted by an insurance company.
º $100K Per Person – Bodily Injury
º $300K Per Accident – Bodily Injury
º $50K in Property Damage coverage
· Part B – Medical Payments
* Provides payment to a covered individual for reasonable and
necessary medical expenses incurred within 3 years of an automobile
accident.
· Part C – Uninsured Motorist Coverage
* This exists to meet the needs of “innocent” victims of accidents
who are negligently injured by uninsured, underinsured or hit and run
motorists.
· Part D – Coverage for Physical Damage to Vehicle
* Collision vs Comprehensive
* Collision Insurance is auto insurance that pays for collision
damage to an insured automobile regardless of who is at fault.
* Comprehensive Insurance protects against loss to an insured
automobile caused by ANY peril not just an accident. This means that
it includes theft, vandalism, etc.
Example Problems:
1) If an insured has a 150/300/100 policy and is responsible for
causing an accident where 1 person was injured (not the insured) and
was awarded $200K for bodily injury damages and $50K in property
damage by the court (the victim was driving a $50K Lexus when she was
hit), how much would the insurance company pay to the victim? How
much would the insured be responsible for paying to the victim?
Answer: The insurance company would pay $150K for bodily injury
(because the policy limit is $150K per person, max of $300K per
accident in bodily injury) and would also pay the $50K in property
damage because the insured has coverage up to $100K for property
damage. Since the court awarded the victim a total of $250K in
damages and the insurance company will only pay $200K total in
damages, the insured is responsible for paying the remaining amount,
$50K.
2) If an insured has a 100/400/50 policy and is responsible for
causing an accident where 10 people are injured and each one is
awarded $75K by the court for bodily injury damages. How much will
the insurance company pay to the victims, how much will the insured
pay to the victims?
Answer: The insurance company would pay $400K total because even-
though the insured has $100K in coverage for each person injured in
an accident, they only have $400K in coverage in total for each
accident. $75K * 10 victims = $750K, the insurance company will only
cover the first $400K of that. The remaining $350K will need to be
paid by the insured.
3) If you're a victim of a hit and run, what portion of your
automobile insurance covers you for any losses you sustain?
Answer: Uninsured Motorist Coverage
4) Your car got broken into, your stereo was stolen and there was
serious damage to the vehicle. What type of coverage do you hope you
had on your car?
Answer: Comprehensive coverage
That's all folks, best of luck with your studying, remember if you
have any questions please come to the review session or come visit us
in office hours.
I'll be hosting office hours on Tuesday from 11am - noon in my office
and Christy will hold office hours also on Tuesday from noon - 1pm in
her office. Kam & Jeff will host office hours by appointment only
due to their finals schedule.
It has been an enjoyable quarter, thank you for the opportunity to
teach you all a little bit about personal finance,
Eric
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Eric Johnson Area Code (530)
Agricultural & Resource Economics Voice 400-0333
2132 Social Sciences & Humanities Fax 231-0200
University of California, Davis
Davis, California 95616 ejjohnson@ucdavis.edu
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