Adrian owns an older used car that is valued at about $1,000.
He is considering whether to change his car insurance policy.
He has the option to purchase additional coverage for $200/month that will protect his vehicle if it is damaged in an accident. If there is an accident, the insurance company will pay Adrian the amount his vehicle is worth.
Purchasing insurance can help Adrian risk.
Adrian’s best decision in this case is to because the policy is .

Question

24-06-2024
Business

Answered

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Adrian owns an older used car that is valued at about $1,000.
He is considering whether to change his car insurance policy.
He has the option to purchase additional coverage for $200/month that will protect his vehicle if it is damaged in an accident. If there is an accident, the insurance company will pay Adrian the amount his vehicle is worth.
Purchasing insurance can help Adrian risk.
Adrian’s best decision in this case is to because the policy is .

Sagot :

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rakshyanepali2021 rakshyanepali2021 · Answer 1 · 2024-06-24T13:17:00-04:00

Answer:

Adrian should not purchase the additional $200/month coverage to protect his $1,000 vehicle. Here's why:The cost of the insurance policy ($200/month) is extremely high compared to the value of the car ($1,000). Over the course of a year, the insurance would cost $2,400, which is more than twice what the car is worth.Even if Adrian gets into an accident and the insurance company pays him the $1,000 value of the car, he will have still lost money overall by paying $2,400 in premiums. It would be cheaper for him to simply pay for any repairs out-of-pocket if an accident occurs.The additional coverage is not a good value for Adrian given the low value of his car. He would be better off saving the $200/month and using that money to purchase a replacement vehicle if his current one is damaged beyond repair.In summary, Adrian's best decision is to not purchase the additional $200/month coverage. The high cost of the policy compared to the low value of his car makes it an unwise financial choice. Adrian should decline the coverage and self-insure his older, inexpensive vehicle.

Sagot :

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