Question

Remember John from the last question. The policy on his 2005 Lexus provides Collision with a $500 deductible, Comprehensive with a $250 deductible, and rental reimbursement at $20/day or $600 total. Damage to the front bumper, right front fender, and side panel totaled $2,732.00. His car was not drivable. Two days after the accident, John went out on his own, without discussing it with the adjuster, and rented a Lincoln Towncar at a rate of $65.00/day (he couldn't find a Lexus anywhere). While his car was being repaired, he incurred 22 days of rental expense, or $1,430.00 plus 7% tax for a total of $1,530.10. John presented the bill to the insurance company. As the adjuster, how much would you pay?

(A) $1,030.10
(B) $1,430.00
(C) $ 600.00
(D) $1,530.10

Answer 1

The insurance company would pay $2,582.00.

Step-by-step explanation:

To calculate the amount the insurance company would pay, we need to consider the deductibles and the rental reimbursement. The total repair cost of $2,732.00 is higher than the deductible for both Collision ($500) and Comprehensive ($250). Therefore, the insurance company would pay the full repair cost minus the deductibles, which is $2,732.00 - $500 - $250 = $1,982.00. As for the rental reimbursement, John rented a car for 22 days at a rate of $65.00/day for a total of $1,430.00 plus tax. Since the rental reimbursement policy provides for a maximum of $600, the insurance company would pay $600.00. Therefore, the total amount the insurance company would pay is $1,982.00 + $600.00 = $2,582.00.