Final answer:
Alicia will have to pay $15,000 out of pocket for the bodily injury liability since the verdict amount is $40,000 and her reduced coverage is only $25,000. The collision deductible may not apply to the bodily injury liability.
Step-by-step explanation:
Alicia had a collision deductible of $500 and a Bodily Injury Liability coverage limit of $50,000. However, she reduced her policy from $50,000 to $25,000 before the accident. Given that the verdict to compensate the injured person is $40,000, Alicia would be responsible for the difference between her coverage limit and the verdict amount, since the verdict exceeds her coverage limit after she reduced it.
Therefore, Alicia will have to pay the amount that exceeds her reduced coverage limit of $25,000. The difference between the verdict amount ($40,000) and her coverage limit ($25,000) is $15,000. Since her coverage is less than the verdict, Alicia will have to pay $15,000 out of pocket, in addition to her $500 deductible for the collision, if applicable to this part of the coverage.
It's important to remember that a deductible is the amount one pays out of pocket before insurance coverage begins. In this case, we're focusing on the Bodily Injury Liability, not the damage to her vehicle, so the deductible may not apply.