Question

Jennifer purchased a house in a brand new development in the outskirts of town. When her house was built, the nearest fire department was nearly 20 miles away. As her neighborhood developed, the density of the community called for a new fire department 1.5 miles away. What effect will the new fire station have on her homeowners insurance premium? a. A new fire department will be more demanding on local taxes. Her annual premium will go up. b. The location of a fire department has no bearing on the value of her house. Her annual premium will stay the same. c. The new fire department will reduce the risk of financial loss in her home. Her annual premium should decrease. d. With a fire department so close (less than 5 miles), financial risk on Jennifer’s home practically disappears. She will not need to pay insurance anymore. Please select the best answer from the choices provided A B C D

Answer 1

Answer: c. The new fire department will reduce the risk of financial loss in her home. Her annual premium should decrease.

Step-by-step explanation:

When she first bought the house, the Fire Department was quite far away meaning that should her house catch fire, they would take too long to get to her house and the risk damage to her house is huge. Because of this, the Insurance company will charge her a higher premium.

With a Fire Department now just 1.5miles away, should her house catch fire, the Fire Department can arrive on time and potentially limit the damage to the house thus driving down the risk of the house suffering too much damage in the event of a fire. This will lead to her premiums dropping since the house is now LESS AT RISK.