Natalie has an auto insurance policy that includes both collision and comprehensive coverage.She has a $500 deductible on her collision coverage and a $200 deductible on her comprehensive coverage.Her car has a book value of $7,000 when her car is damaged by a tornado.The car will cost $8,500 to repair.How much will Natalie's insurance company pay in this situation?
A)$6,500
B)$6,800
C)$8,000
D)$8,300

Question

Quizplus · Accepted Answer

Since Natalie has both collision and comprehensive coverage, we need to determine which coverage will apply in this scenario.

Since the car was damaged by a tornado, this would be covered under Natalie's comprehensive coverage, which has a $200 deductible. Therefore, Natalie would need to pay $200 out of pocket.

Now, we need to determine how much Natalie's insurance company will pay. The car has a book value of $7,000 and will cost $8,500 to repair. Since the cost to repair the car is greater than its book value, the insurance company will consider the car a total loss.

The insurance company will pay out the actual cash value of the car, which is $7,000 minus the $500 collision deductible (since collision coverage would apply if the car was repairable). Therefore, the insurance company will pay out $6,500 ($7,000 - $500) to Natalie.

Adding in Natalie's $200 deductible, the total amount she will receive from her insurance company is $6,700 ($6,500 + $200), which is closest to option B, $6,800.

Natalie Has an Auto Insurance Policy That Includes Both Collision