Question

collision coverage: calculating insurance payout
shia has a car insurance policy with a collision coverage limit of $10,000 and a deductible of $500. after an accident, the cost to repair shias car is estimated at $8,000.
how much will the insurance company pay for the repair?
$8,500 $9,500 $10,500 $7,500

Explanation:

Step1: Understand Insurance Payout Formula

The insurance payout for collision coverage is generally calculated as the repair cost minus the deductible, provided the repair cost is less than the coverage limit. The formula is \( \text{Payout} = \text{Repair Cost} - \text{Deductible} \) (when Repair Cost \( \leq \) Coverage Limit).

Step2: Plug in the Values

Given repair cost \( = \$8,000 \), deductible \( = \$500 \), and coverage limit \( = \$10,000 \). Since \( 8000 \leq 10000 \), we use the formula.

\( \text{Payout} = 8000 - 500 = 7500 \)

Answer:

\$7,500