Question

Eleanor 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. Six years into her policy, a tree fell on Eleanor's home and caused $40,000 worth of damage. Eleanor's insurance company paid the claim. Did the cost of the benefit of transferring the risk to the insurance company outweigh the cost of the premium? Yes, the cost of the annual premium for 10 years was more than the accident claims Yes, the cost of the annual premium for 10 years was less than the accident claims No, the cost of the annual premium for 10 years was the same as the accident claims No, the cost of the annual premium for 10 years was more than the accident claims

Answer 1

Yes, the cost of the annual premium for 10 years was less than the accident claims

Step-by-step explanation:

Eleanor pays 2,000 dollars per year on premium. In ten-years will pay 20,000 dollars.

The tree caused damage for $ 40,000 thus, more than the premium cost.

It was worthwhile for Eleanor as it paid 20,000 dollar distributed among 10 years for damaged worth $ 40,000