UNIVERSITY OF ILLINOIS AT URBANA CHAMPAIGN College of Business D E PAR T M E N T O F F I NAN C E Finance 230 Fall 2007 Assignment 2 Due September 7 2007 For the following questions assume that you have the State Farm Car Policy handed out in class including the coverages and limits shown on the Declarations page For each situation calculate how much your insurance policy would pay in total Unless otherwise indicated assume the loss occurs during the policy period Do not assume facts not given in the question 1 You are driving your car to the football game when you are hit by an uninsured driver from Western Illinois Fortunately you are not hurt but your car is damaged and does not run You immediately report the loss to your insurance company It takes four days and costs 5 100 to repair your car While your car is being repaired you rent a replacement vehicle that costs 35 a day Your policy will pay A D 5 000 5 240 B E 5 100 None of the above C 5 140 2 While walking to class you are hit by a car and seriously injured You incur 15 000 in medical bills You are entitled to collect a bodily injury award of 150 000 but the driver is not insured Your policy will pay A D 15 000 125 000 B E 100 000 None of the above C 115 000 3 You are driving to Indiana to see the Illini football game when you see a driver going the wrong way on I 74 coming straight at you You swerve to avoid a collision and lose control of your car Your car goes off the road and rolls over several times Since you were not wearing your seatbelt your bad you are thrown from the car and severely injured You incur 50 000 in medical bills and would be entitled to a 250 000 bodily injury award against other driver but he did not stop and is never identified It costs 10 000 to repair your car the Actual Cash Value of your car was 9 100 Your policy will pay A D 9 000 259 900 B E 34 000 None of the above C 134 000 4 You are driving your car in Urbana with two friends as passengers when you are hit from behind by a drunk uninsured driver You are all injured You incur 40 000 in medical bills and are entitled to a 90 000 bodily injury award against the at fault driver Each of your friends incurs 20 000 in medical bills and is entitled to a 60 000 bodily injury award Your policy will pay A D 25 000 210 000 B E 65 000 None of the above C 130 000 5 While driving your car in Mexico 10 miles from the U S border you are hit by a driver with only 10 20 5 liability limits The accident is the fault of the other driver You are injured and your car is damaged You incur 10 000 in medical bills You are entitled to a 25 000 bodily injury award It costs 2 100 to repair your car Your policy will pay A D 0 17 000 B E 10 000 None of the above C 15 000 6 You are sitting in your car at a stop sign in Champaign when someone runs into the back of your car You were not wearing your seatbelt and end up smashing through your windshield incurring permanent brain damage You incur 200 000 in medical bills You are entitled to a bodily injury award of 500 000 and a property damage award against the other driver It costs 5 100 to repair your car The other driver only carries 50 100 25 liability limits Your policy will pay A D 0 130 000 B E 30 000 None of the above C 75 000 7 You are driving your car in Illinois when you run into the back of a bus causing it to leave the road and land in a ditch Ten people on the bus are injured and each wins a bodily injury award against you for 50 000 It costs 140 000 to repair the bus and 8 100 to repair your car A D 158 000 648 000 B E 408 000 None of the above C 608 000 8 You are playing golf one day up in Chicago when a 10 year old girl driving a golf cart for her parents accidentally runs over your foot Trying to be polite you tell the family whom you do not know that you are fine However the next day your foot hurts so badly that you have to go to the doctor It turns out your toe is broken You incur 15 000 in medical bills You would be entitled to a 30 000 bodily injury award if you could find the people involved but you never find out who they were A D 0 30 000 B E 15 000 None of the above C 25 000 9 According to Todd Hart the guest speaker on August 24 what does the term underwriting mean A D Risk assessment Profitability analysis B E Strategic planning C Providing equity capital Policy review 10 According to Todd Hart the guest speaker on August 24 what proportion of cars in the state of Illinois does State Farm insure A D 1 in 10 1 in 2 B E 1 in 5 None of the above C 1 in 3
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