Makiko Iwanami, a student from Osaka, Japan, is in one of your classes. She is considering the purchase of a used car and has been told that she must buy automobile insurance to register the car and obtain license plates. Makiko has come to you for advice, and you have decided to focus on three aspects of automobile insurance.
(a) Explain how liability insurance works in the United States. Advise Makiko about which liability insurance limits she should select.
(b) Makiko is especially impressed that automobile insurance includes medical payments coverage because she has no health insurance. Explain why the medical payments coverage does not actually solve her health insurance problem, and describe the type of coverage it provides.
(c) Makiko plans to pay cash for the car and doesn’t want to spend more than $5,000. Outline the coverage provided by collision insurance and factors that might make such coverage optional for Makiko.