8. An insured has a Personal Automobile Policy with $250 deductible Collision coverage and $100 deductible Other Than Collision coverage. The insured runs a stop sign and hits another car. There is $1,300 worth of damage to the insured's car. How much would the insurer pay for the damage to the insured's car?
Answer: B
The insurer would pay $1,050 for the damage to the insured's car.
In this scenario, after subtracting the applicable deductible from the total damage amount, the insurer will cover the remaining costs. Since the insured has a $250 deductible for collision coverage and the total damage is $1,300, the calculation is $1,300 - $250 = $1,050.
A) $0
This option is incorrect because the insured has collision coverage that applies to the damages incurred. While the insured is responsible for the deductible amount, the insurer will still cover the remaining cost, which prevents the total payout from being $0.
B) $1,050
This is the correct answer. After applying the $250 deductible for the collision coverage to the total damage of $1,300, the insurer pays $1,050. The calculation reflects the insured's responsibility for the deductible, allowing for a payout that accurately represents the remaining damage costs.
C) $1,200
This option is incorrect because it represents a miscalculation of the deductible applied to the damages. If $1,200 were paid, it would imply an incorrect deduction of only $100, rather than the $250 deductible that is applicable in this case.
D) $1,300
This option is incorrect as it fails to account for the deductible that the insured must pay before the insurer covers the damages. The full amount of damage cannot be paid out without subtracting the deductible, thus making this answer invalid.
Conclusion
The correct answer, $1,050, is derived by accurately applying the $250 deductible to the total damage of $1,300. All other options misinterpret the application of the deductible or overlook the insurance coverage's terms, leading to incorrect conclusions. This understanding is crucial for determining the actual payout amount in scenarios involving deductible coverage.