Final answer:
In automobile insurance, comprehensive coverage of $30,000 means the insurance company covers the policyholder's car damages up to that amount, distributing risks among policyholders and utilizing collective premiums to protect individuals up to the specified limit.
Step-by-step explanation:
In automobile insurance, if the comprehensive coverage is $30,000, this means that the insurance company will pay for the damage done to the policyholder's car.
This form of coverage protects against damages to your vehicle that are not caused by collisions, such as theft or natural disasters.
In a simplified example of how car insurance works, different groups of drivers experience varying levels of accidents and damages.
In this scenario, those with minor damages such as door dings or chipped paint costing $100 each, and those with medium or large accidents, with damages costing upwards of $1,000 or $15,000 respectively, all share in the total pool of risk.
If drivers are not separated into risk groups and charged accordingly, those with lower damages essentially subsidize the costs for those with higher damages.
If each of the 100 drivers in the example pays the same premium of $1,860, it demonstrates how insurance pools resources to cover the risks and damages across all policyholders, implicitly showing that comprehensive coverage entails a collective contribution to individual protection up to the specified coverage limit, in this case, $30,000.