A location’s risks can make a difference in premium costs. Think about two houses, one built on a mesa (a high desert plateau) in Arizona and the other built on the Louisiana coast (below sea level). Which location is more likely to experience flooding? Which house would have lower premiums for flood insurance? Auto insurance premiums are usually higher for teen drivers than for middle-aged drivers. What does this tell us about teen drivers?

Health insurance premiums are usually higher for smokers than nonsmokers. Why do you think this is?