Question

Jill paid an annual premium of $2,000 in total coverage for her homeowner's insurance, including $250,000 in damage coverage and $250,000 in liability coverage. Ten years into her policy, a friend fell off a ladder while working on the roof of her house and claimed $75,000 in medical expenses. Eleanor's insurance company paid the claim. Did the cost of the annual premiums outweigh the benefit of transferring the risk to the insurance company?

Answer 1

Answer:

No.

Explanation:

After ten years of paying an annual premium of $2000 to the insurance company, Jill has paid $20,000 in total to the insurance company in order to transfer them the risk, and when something happend, the insurance company spent $75,000 for the accident that happened in Jill´s house, this leaves jill debt free and with a $55,000 profit from her decision to transfer the risk to the insurance company, otherwise she would have had to pay the $75,000 in medical bills and if she had being saving that premium fee over the years she would only have $20,000.

Answer 2

No, the cost of the annual premium for 10 years was less than the accident claims