Question

Hank has collision coverage with a $2,000 deductible on his 2010 truck. One dark rainy night Hank's truck slipped off the road and rolled down the embankment. Hank's truck sustained $45,000 in damages, but the actual cash value of the vehicle is only $25,000. Which of the following statements is TRUE?

Answer 1

Hank will have to pay $2,000 out of pocket before his insurance coverage kicks in for the damages to his truck.

Step-by-step explanation:

The statement that is TRUE is that Hank will have to pay $2,000 out of pocket before his insurance coverage kicks in for the damages to his truck. Hank's collision coverage with a $2,000 deductible means that he is responsible for the first $2,000 of damages. Since the actual cash value of his truck is only $25,000, which is less than the $45,000 in damages, Hank will only receive a maximum payout of $25,000 from his insurance company. Therefore, Hank will have to pay the $2,000 deductible and the remaining $20,000 out of pocket to cover the full cost of the damages to his truck.