Final answer:
In an example of automobile insurance, 100 drivers experience various accidents, totaling $186,000 in damages. If each pays a $1,860 premium, the insurance covers the costs.
Step-by-step explanation:
When it comes to automobile insurance, a simplified example can help understand how premiums and coverages work. Let's consider a group of 100 drivers without initially knowing their risk levels. In this group, 60 drivers might experience minor accidents that cost $100 each, 30 drivers might have medium accidents costing $1,000 each, and 10 drivers may have large accidents costing $15,000 each. The total damage from accidents would amount to $186,000. If each driver pays an insurance premium of $1,860 yearly, the collected amount would be sufficient to cover the total damage incurred by these accidents.