Question

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

A. Collision coverage will not indemnify Hank for this accident
B. Hank will be indemnified by his insurer for $23,000
C. Hank will be indemnified by his insurer for $25,000
D. Hank will be indemnified by his insurer for $43,000

Answer 1

The correct answer is A. Collision coverage will not indemnify Hank for this accident.

Step-by-step explanation:

The correct answer is A. Collision coverage will not indemnify Hank for this accident.

Collision coverage is an automobile insurance coverage that helps pay for damage to a vehicle in a collision, regardless of who caused the accident. However, in this scenario, the actual cash value of Hank's truck is only $25,000, which is less than the $2,000 deductible. Since the truck sustained $45,000 in damages, Hank will not be indemnified by his insurer for this accident as the claim amount does not exceed the deductible.