Lucia

Lucia is a 24-year old graduate student. She owns very little, with the exception of an old family car, valued at about $1,000, which gets her from her apartment to campus and back. Lucia is not married, nor does she have any children. She works a part-time job during the day that covers rent and bills. She attends her graduate classes at night, where she studies archaeology. She has her own collection of antique books she’s collected over the years, valued at about $10,000.

Part I: Choose Insurance

Your job is to advise the person you’ve selected about purchasing insurance. Assume that your character currently has no insurance of any kind, so you are starting from scratch.

Consider the circumstances of your character’s lifestyle. Based on what you know, determine whether your character should or should not purchase automobile, homeowner’s, health, and/or life insurance, and justify your choices.

For each type of insurance selected, look at the menu of options provided and decide which type(s) of coverage should or should not be included in the policy. Again, you will need to explain your reasoning.

Finally, consider the monetary aspects of each insurance policy. From the menu of options, select what you think is the most appropriate level of financial coverage for your character and, when applicable, the deductible amount. Round values to the nearest $100, $1,000, $10,000, or $100,000, as appropriate. Keep in mind that the higher the level of coverage, the higher the premium your character will need to pay.

Insurance Types of Coverage Levels of Coverage Deductible
Automobile Bodily Injury Liability minimum $10,000 required up to $300,000 $0 to $500
Property Damage Liability minimum $10,000 required up to $300,000
Collision up to $100,000
Comprehensive up to $100,000
Uninsured/Underinsured Motorist up to $300,000
Homeowner’s Property up to $900,000 $0 to $2000
Liability up to $900,000
Health All Medical unlimited no deductible
Life Term up to $900,000 no deductible
Whole up to $900,000
For each of the four types of insurance, submit the following to your instructor, using complete sentences:

Name the kind of insurance (automobile, homeowner’s, health, life).
Should your character* purchase a policy? Why or why not?
If yes, which types of coverage do you recommend? Why?
What level of coverage do you suggest? Why?
Which deductible amount do you advise? Why?
*Although you should consider the family circumstances of your character to make the wisest choices, you are only suggesting the insurance policies that the named individual should purchase.

Part II: Insurance Calculations

Suppose your character has purchased all the insurance coverage you have advised. It’s a year later. Your character has gotten into an automobile accident. No one was injured but the car was totaled. This means that the repair/replacement costs of the car are equivalent to the value of the car. Your character was not at fault for the accident but the driver of the other car, who caused the accident by running a red light, had only the minimum $10,000 in liability coverage.

Give a financial assessment of the damages and who will be responsible for what portion of them. Provide a summary that includes calculations and explanations. Make sure your summary includes answers to the following questions. Submit your responses to your instructor.

What is the value of the financial damage done to your character’s car?

How much of the damage will be covered by the insurance company of the driver who was at fault for the accident?

Will your character need to pay anything out-of-pocket? How much?

How much of the damage will be covered by your character’s insurance company?
Part III: Analyze Insurance

Based on your advice, your character has purchased an automobile insurance policy with certain levels of coverage and deductible. Your character may have had to make a claim on that insurance because of an accident. Now it’s time to analyze those choices.

Answer the following questions in complete sentences. Submit your answers to your instructor.

Do you think your character had an appropriate level of coverage and an appropriate deductible in the automobile insurance policy? Why or why not?

How might the financial consequences of the accident been different for your character had there been more types of coverage and/or higher levels of coverage in the policy?

How might the financial consequences of the accident been different for your character had there been fewer types of coverage and/or lower levels of coverage in the policy?