Many insurance policies carry a deductible provision that states how much of a claim a person must pay out of pocket before the insurance company pays the remaining of the expenses. For example, if someone is a claim for $350 on a policy with a $200 deductible, he or she pays $200 and the insurance company pays $150. In the following cases, determine how much a person would pay with and without an insurance policy Complete parts (a) through (4) below.
a. A person has a car insurance policy with a $800 deductible provision (per claim) for collisions. During a two-year period, the person files claims for $560 and $950. The annual premium for the policy is 5560
With the insurance policy, the person would pay $ Without the insurance policy, the person would pay $
(Type whole numbers.)
b. A person has a car insurance policy with a $300 deductible provision (per claim) for collisions. During a two-year period, the person fles claims for $560 and $1350. The annual premium for the policy is $750
With the insurance policy, the person would pay without the insurance policy, the person would pay $
(Type whole numbers.)
C. A person has a car insurance policy with a $1000 deductible provision (per claim) for collisions. During a two-year period, the person files claims for $210 and $1500. The premium for the policy is $300
With the insurance policy, the person would pay without the insurance policy, the person would pay $
(Type whole numbers.)
d. Explain why lower insurance premiums go with higher deductibles. Choose the correct answer below.
OA. High deductibles attract more customers.
OB. The insurance company does not want to make a profit, low premiums attract more customers
OC. The insurance company aims to make a profit, so they have to offset for the low premium with a high deductible
OD. If the premium is low the insurance company will make a higher profit during high claims.