Jim has a PAP with liability limits of 25/50/25 and $5,000 in medical payments coverage. Jim causes an accident which leaves him with $7,500 in medical costs and $50,000 in property damage to a parked BMW. How much will Jim be out of pocket in total for all damages occurring in this accident?

Rationale

Jim will be out of pocket a total of $27,500 for all damages occurring in this accident.

Jim's liability limits of 25/50/25 mean he has $25,000 coverage for bodily injury per person, $50,000 total for bodily injury per accident, and $25,000 for property damage. He incurs $7,500 in medical costs, which will be partially covered by his medical payments coverage, and $50,000 in property damage, which exceeds his property damage limit.

A ($45,000) YOUR ANSWER

This choice incorrectly adds Jim's medical costs and property damage without accounting for the insurance coverage. The total of $7,500 in medical costs and $50,000 in property damage exceeds what Jim will actually pay out of pocket after applying his coverage limits.

B ($32,000) YOUR ANSWER

This option miscalculates the total by not properly applying Jim's medical payments coverage and liability limits. The medical payments will cover part of his medical costs, and the property damage exceeds the limit, leading to a different out-of-pocket amount.

C ($27,500) CORRECT

This choice accurately reflects Jim's out-of-pocket expenses. He pays $2,500 for his medical costs after $5,000 in medical payments coverage, and he pays the full $25,000 property damage liability limit, totaling $27,500.

D ($42,500) YOUR ANSWER

This choice overestimates Jim's out-of-pocket costs by incorrectly assuming he would pay the full amount of both his medical expenses and property damage. It disregards the medical payments coverage that reduces his total medical expenses owed.

Conclusion

Jim's total out-of-pocket expenses amount to $27,500 due to the interplay of his insurance coverage and the accident's costs. After utilizing his medical payments coverage and facing liability limits on property damage, he is left with this final amount. Understanding how insurance limits apply is crucial in calculating total financial responsibility following an accident.

Jim has a PAP with liability limits of 25/50/25 and $5,000 in medical payments coverage. Jim causes an accident which leaves him with $7,500 in medical costs and $50,000 in property damage to a parked BMW. How much will Jim be out of pocket in total for all damages occurring in this accident?

Jim will be out of pocket a total of $27,500 for all damages occurring in this accident.

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