Select The Correct Answer.Cameron Is Choosing A Car Insurance Plan. Based On His Driving History And The Traffic Where He Lives, Cameron Estimates That There Is A $25\%$ Chance He Will Have A Car Collision This Year. In Each Plan, The

Feb 26, 2025 by ADMIN 235 views

**Understanding Probability and Insurance Plans**

Introduction

When it comes to choosing a car insurance plan, understanding the probability of having a car collision is crucial. In this scenario, Cameron is faced with the task of selecting a suitable insurance plan based on his driving history and the traffic conditions in his area. With a $25\%$ chance of having a car collision this year, Cameron needs to consider the potential risks and choose a plan that provides adequate coverage.

Calculating the Probability of a Car Collision

To begin with, let's understand the concept of probability. Probability is a measure of the likelihood of an event occurring. In this case, the event is a car collision, and the probability is $25\%$ . This means that there is a one-in-four chance that Cameron will be involved in a car collision this year.

Understanding the Insurance Plans

Cameron is presented with several insurance plans, each with its own set of features and benefits. The plans vary in terms of the coverage they offer, the premium costs, and the deductibles. To make an informed decision, Cameron needs to carefully evaluate each plan and consider the following factors:

Coverage: What is the extent of coverage offered by each plan? Does it cover damages to the vehicle, medical expenses, or both?
Premium: What are the premium costs associated with each plan? Are there any discounts available for good drivers or low-mileage drivers?
Deductible: What is the deductible amount for each plan? Is it a fixed amount or a percentage of the total damages?
Additional Features: Are there any additional features offered by each plan, such as roadside assistance, rental car coverage, or accident forgiveness?

Evaluating the Probability of a Car Collision

Now that we have a better understanding of the insurance plans, let's evaluate the probability of a car collision. With a $25\%$ chance of having a car collision this year, Cameron needs to consider the potential risks and choose a plan that provides adequate coverage.

Expected Value of a Car Collision

To further evaluate the probability of a car collision, let's calculate the expected value of a car collision. The expected value is a measure of the average value of a random variable. In this case, the random variable is the cost of a car collision.

Assuming the cost of a car collision is $10,000, the expected value can be calculated as follows:

Expected Value = (Probability of a car collision) x (Cost of a car collision) Expected Value = 0.25 x $10,000 Expected Value = $2,500

This means that, on average, Cameron can expect to pay $2,500 in the event of a car collision.

Choosing the Correct Insurance Plan

Now that we have evaluated the probability of a car collision and calculated the expected value, let's choose the correct insurance plan. Based on the factors mentioned earlier, Cameron needs to consider the following:

Coverage: Cameron needs to choose a plan that provides adequate coverage for damages to the vehicle and medical expenses.
Premium: Cameron needs to choose a plan with a premium cost that is within his budget.
Deductible: Cameron needs to choose a plan with a deductible amount that is reasonable and affordable.
Additional Features: Cameron needs to choose a plan that offers additional features such as roadside assistance, rental car coverage, or accident forgiveness.

Conclusion

In conclusion, choosing the correct insurance plan requires a thorough understanding of the probability of a car collision and the factors that affect the cost of a car collision. By evaluating the probability of a car collision and calculating the expected value, Cameron can make an informed decision and choose a plan that provides adequate coverage and meets his needs.

Recommendations

Based on the factors mentioned earlier, here are some recommendations for Cameron:

Choose a plan with a high coverage limit: Cameron needs to choose a plan that provides adequate coverage for damages to the vehicle and medical expenses.
Choose a plan with a low premium cost: Cameron needs to choose a plan with a premium cost that is within his budget.
Choose a plan with a reasonable deductible amount: Cameron needs to choose a plan with a deductible amount that is reasonable and affordable.
Choose a plan with additional features: Cameron needs to choose a plan that offers additional features such as roadside assistance, rental car coverage, or accident forgiveness.

By following these recommendations, Cameron can choose the correct insurance plan and ensure that he is adequately protected in the event of a car collision.

Final Thoughts

Glossary

Probability: A measure of the likelihood of an event occurring.
Expected Value: A measure of the average value of a random variable.
Coverage: The extent of coverage offered by an insurance plan.
Premium: The cost of an insurance plan.
Deductible: The amount that must be paid out of pocket before an insurance plan kicks in.

References

[1] "Probability and Statistics for Engineers and Scientists." By Ronald E. Walpole, Raymond H. Myers, Sharon L. Myers, and Keying E. Ye.
[2] "Insurance and Risk Management." By Robert E. Hoyt and Robert L. Clark.

Appendix

Probability Formulas: The following formulas are used to calculate the probability of a car collision:
- P(A) = (Number of favorable outcomes) / (Total number of outcomes)
- P(A ∪ B) = P(A) + P(B) - P(A ∩ B)
- P(A ∩ B) = P(A) x P(B)

Q: What is the probability of a car collision?

A: The probability of a car collision is $25\%$ , which means that there is a one-in-four chance that Cameron will be involved in a car collision this year.

Q: How do I calculate the expected value of a car collision?

A: To calculate the expected value of a car collision, you need to multiply the probability of a car collision by the cost of a car collision. In this case, the expected value is:

Expected Value = (Probability of a car collision) x (Cost of a car collision) Expected Value = 0.25 x $10,000 Expected Value = $2,500

Q: What factors should I consider when choosing an insurance plan?

A: When choosing an insurance plan, you should consider the following factors:

Coverage: What is the extent of coverage offered by the plan?
Premium: What is the cost of the plan?
Deductible: What is the deductible amount?
Additional Features: Are there any additional features offered by the plan, such as roadside assistance or rental car coverage?

Q: How do I choose the correct insurance plan?

A: To choose the correct insurance plan, you need to evaluate the probability of a car collision and calculate the expected value. Based on the factors mentioned earlier, you should choose a plan that provides adequate coverage, has a low premium cost, has a reasonable deductible amount, and offers additional features.

Q: What is the difference between a deductible and a premium?

A: A deductible is the amount that must be paid out of pocket before an insurance plan kicks in. A premium is the cost of an insurance plan.

Q: Can I customize my insurance plan to meet my needs?

A: Yes, you can customize your insurance plan to meet your needs. You can choose a plan that provides adequate coverage, has a low premium cost, has a reasonable deductible amount, and offers additional features.

Q: How do I know if I have chosen the correct insurance plan?

A: To know if you have chosen the correct insurance plan, you need to evaluate the probability of a car collision and calculate the expected value. Based on the factors mentioned earlier, you should choose a plan that provides adequate coverage, has a low premium cost, has a reasonable deductible amount, and offers additional features.

Q: Can I change my insurance plan if I need to?

A: Yes, you can change your insurance plan if you need to. However, you should carefully evaluate the new plan and consider the following factors:

Coverage: What is the extent of coverage offered by the new plan?
Premium: What is the cost of the new plan?
Deductible: What is the deductible amount?
Additional Features: Are there any additional features offered by the new plan?

Q: How do I file a claim with my insurance company?

A: To file a claim with your insurance company, you need to follow these steps:

Notify your insurance company: Inform your insurance company of the accident and provide them with the necessary information.
Gather evidence: Collect evidence of the accident, including photos, witness statements, and police reports.
Submit a claim: Submit a claim to your insurance company, including the evidence you have gathered.
Wait for processing: Wait for your insurance company to process your claim and provide you with a settlement.

Q: What happens if I am involved in a car collision and I don't have insurance?

A: If you are involved in a car collision and you don't have insurance, you may be liable for the damages. You may also face fines and penalties for not having insurance. It is essential to have insurance to protect yourself and others in the event of an accident.

Q: Can I get insurance if I have a poor driving record?

A: Yes, you can get insurance if you have a poor driving record. However, you may face higher premiums and stricter terms. It is essential to shop around and compare insurance quotes to find the best plan for your needs.

Q: How do I know if I have chosen the correct insurance company?

A: To know if you have chosen the correct insurance company, you need to evaluate the following factors:

Reputation: What is the reputation of the insurance company?
Coverage: What is the extent of coverage offered by the insurance company?
Premium: What is the cost of the insurance company?
Deductible: What is the deductible amount?
Additional Features: Are there any additional features offered by the insurance company?

By following these steps, you can choose the correct insurance company and ensure that you are adequately protected in the event of a car collision.