Question

William pays his $500 premium every 6 months for automobile insurance with collision coverage. His deductible is $750. William caused a minor accident that resulted in $700 of damages to his car and $1,100 of damages to the other car. William's car looks and drives fine and he chooses not to file a claim to repair his car. How much will William pay out-of-pocket to have the other car fixed?

Answer 1

ANSWER: $0

EXPLANATION: William has already paid $500 premium for his automobile insurance and it covers collision coverage. It is mandatory for US states to have third party liability as basic option while taking an automobile insurance. Hence, the insurance company will pay the damages for the other car and as well as for the damages that has happened to William's car. William need not spend any amount out-of-pocket to have the other car fixed as it covered under third party liability of the insurance.

Answer 2

William pays $500 every 6 months as a premium on his car insurance with collision coverage. If William were to get in an accident and file a claim, he would pay $750 as a deductible and the insurance would cover the cost of repairs to the vehicles. When you file a claim against your insurance, your next set of premiums typically rise in the event it were to happen again, it brings in more money to the insurance agency. Since William’s car is $700 to fix and the other drivers car is $1,100 to fix if William does not file a claim with his insurance, he will pay an out-of-pocket amount of $1,100 to have the other car repaired.