Final answer:
The student's question deals with an insurance assessment and payout for a damaged van. It illustrates how the value of a vehicle decreases after an accident and the role of insurance in compensating for that loss. Additionally, an example of how insurance premiums are set to cover costs in a larger group of insured drivers is provided.
Step-by-step explanation:
The question involves calculating and understanding the financial impact of an automobile accident on the value of a van and dealing with the insurance claim that follows. The student is asked to assess the effect of the damage on the van's value and the insurance payout. Here's how the insurance process might work:
When dealing with automobile insurance, an adjuster estimates the post-accident value of the vehicle. If, for instance, a van worth $8,400 before an accident is estimated to be worth $1,500 after the accident, and the insurance company agrees to pay out $1,200 (presumably based on the policy's terms and the damage incurred), the owner is compensated for some of the loss in value due to the accident.
In the general context of insurance, if we have 100 drivers with varying levels of risks and accident costs, the insurance company collects premiums to cover the total costs of accidents. For example, if those costs amount to $186,000, then each driver might pay a premium of $1,860 to cover those expenses over a year, assuming everyone has the same chance of an accident (with no way to differentiate between low, medium, or high-risk drivers).