Final answer:
While the cost of comprehensive and collision insurance could be a significant part of an auto policy, it varies greatly. Insurance premiums are based on risk pooling, with those having fewer risks typically paying less. A simplified example demonstrates how total damages are distributed among drivers with varying accident costs.
Step-by-step explanation:
The statement that the cost of comprehensive and collision insurance is the most expensive part of your automobile policy, representing about 60% of the costs, can generally be considered True or False depending on various factors such as driving records, vehicle type, location, and the insurance company's pricing model. However, without more specifics, it is challenging to definitively characterize this statement as entirely true or false.
To understand how insurance premiums may be calculated, consider a simplified example: A group of 100 drivers experiences varying damage costs from minor door dings to large accidents. The total incurred damage is $186,000:
- 60 drivers with minor damage cost $100 each
- 30 drivers with medium-sized accidents cost $1,000 each
- 10 drivers with large accidents cost $15,000 each
If these 100 drivers each pay the same premium of $1,860, those who incurred lower costs are subsidizing those with higher costs. This demonstrates the concept of risk pooling, where insurance companies classify people into risk groups and adjust premiums accordingly. Those with lower risks pay less, while those with higher risks pay more.