Final answer:
In Mississippi, vehicles must have auto insurance with a minimum of $25,000 in property damage coverage. An example of this is 100 drivers paying a $1,860 premium to cover a total potential damage of $186,000 from accidents. This demonstrates how insurance premiums work to collectively cover accident costs.
Step-by-step explanation:
Vehicles driven in Mississippi must be covered by an auto insurance policy that includes at least $25,000 in property damage coverage. This requirement ensures financial responsibility for damage caused to another person's property during a vehicular accident.
To illustrate, let's consider a group of 100 drivers with varying levels of accident risks. If 60 drivers experience minor damage costing $100 each, 30 drivers face medium-sized accidents with costs of $1,000 each, and 10 drivers undergo large accidents resulting in $15,000 of damage each, the total damage would amount to $186,000.
Given this scenario, if each driver pays a $1,860 premium annually, the insurance company would collect enough to cover the damages incurred. This system of gathering premiums is vital for insurance companies to operate successfully and provide the necessary payouts to those who experience accidents.