HELPPP! Suppose that you head an insurance company. Your most popular insurance policy has a premium of $600 and a deductible of $1,000. This insurance policy provides your state’s minimum coverage of $30,000 for injury or death to one person, $50,000 for injury or death to two or more people, and $10,000 for damage to property, which is called 30/50/10 coverage. Assume that, on average, 2 of your 100 customers have an accident every year. One of the accidents causes damage to property and the other causes injury or death to one person. Both drivers file for the maximum claims
Now assume that you are one of the customers purchasing this popular insurance policy with the company. Considering only your premiums, deductible, and claims, what is the break-even period after which you could make a $10,000 claim for property damage without the insurance company suffering a loss? Explain your answer.