- Suppose that your company’s offi ces and their contents are worth $1,400,000. You carry a $1,200,000 fi re insurance
policy with a 75% coinsurance clause. There is a fi re, which does $1,000,000 of damage to your offi ces. How much of
this damage will be covered by your policy? - Suppose that your company’s offi ces and their contents are worth $1,400,000. You carry a $1,000,000 fi re insurance
policy with a 75% coinsurance clause. There is a fi re, which does $1,000,000 of damage to your offi ces. How much of
this damage will be covered by your policy?
D. Grab Bag
Exercises 34 to 36 are based on the rate table given here:
GLOBAL RISK MUTUAL LIABILITY INSURANCE COMPANY
GENERAL BUSINESS LIABILITY COVERAGE ANNUAL PREMIUMS
Basic $500,000 $975.00
Each additional $250,000 (up to $2 million) $125.00
Each additional $500,000 ($2 million to $10 million) $175.00- Calculate the annual premium for a $750,000 business liability policy.
- Calculate the annual premium for a $2,000,000 business liability policy.
- Calculate the premium for a $4,000,000 business liability policy.
- Suppose that an insurance company sells fl ight insurance policies at an airport kiosk. The policy will pay $5,000,000
to your heirs in the event that your airplane crashes and you die as a result. The company sells the policies for $32.50.
If the likelihood that your plane will crash resulting in your death is 1 in 12,500,000, what is the pure premium for this
policy? (See Exercise 44 for more on this type of policy.) - Bruce has a 100/300/75 auto liability policy. He is involved in a car accident, where he is held responsible for injuries
to four people. Each of the four is awarded $90,000 in damages as a result. How much of these damages will Bruce’s
policy pay? How much will he be left to pay himself? - Bruce has a 100/300/75 auto liability policy. He also has a $2 million umbrella policy. He is involved in a car accident,
where he is held responsible for injuries to four people. Each of the four is awarded $90,000 in damages as a result.
How much of these damages will Bruce’s policy pay? How much will he be left to pay himself?
Exercises 40 to 43 refer to the table below. In addition, these exercises also use the Affi liated Benevolent Mutual auto
insurance rate tables given on page 528. Assume that the rates in those tables are for a 50/150 liability policy.
New Liability Coverage Multiplier New Collision Deductible Multiplier25/50 0.91 $100 1.355
75/200 1.05 $500 0.925
100/300 1.12 $750 0.845
250/500 1.20 $1000 0.725536 Chapter 13 Insurance and Risk Management