Final answer:
The correct answer to the student's question is B) $1,000, 10. This example demonstrates the necessity of automobile insurance, where a group of 100 drivers collectively pays premiums to an insurance company, which then uses that money to cover the total yearly damages of $186,000 from accidents.
Step-by-step explanation:
If a collision results in an injury, death, or property damage of $1,000 or more, you must file a collision report within 10 days. The correct answer to the student's question is B) $1,000, 10.
To understand why automobile insurance is necessary and how it works, consider this scenario: Suppose we have a group of 100 drivers. In one year, 60 drivers have minor accidents with damages costing $100 each; 30 drivers have more significant accidents costing $1,000 each; and 10 drivers have severe accidents costing $15,000 each. Without any way to predict who will fall into which risk category, insurers spread the risk across all drivers. The total damages in a year for this group would be $186,000. If each of the 100 drivers pays an insurance premium of $1,860 annually, the insurance company would collect enough money to cover the damages.