In order to lower his monthly auto insurance bill, Henry has decided to change his existing policy by increasing the deductible for both collision and comprehensive insurance to the highest amount permitted by his insurance company, AA Auto Insurance. His current monthly auto insurance bill, which includes a $250.00 deductible for collision and a $50.00 deductible for comprehensive, is $43.79. How will Henry's monthly auto insurance bill be affected by the change?

Question

AA Auto Insurance
Type of Insurance Coverage
Coverage Limits
Annual Premiums
Bodily Injury
$25/$50,000
$22.50

$50/100,000
$31.75

$100/300,000
$40.25

Property Damage
$25,000
$120.50

$50,000
$144.75

$100,000
$193.00

Collision
$100 deductible
$520.00

$250 deductible
$415.25

$500 deductible
$275.75

Comprehensive
$50 deductible
$110.25

$100 deductible
$100.00

a.
$12.48
b.
$31.31
c.
$149.75
d.
$275.75

Answer 1

To determine how Henry's monthly auto insurance bill will be affected by raising his deductibles for collision and comprehensive insurance, we need to find the premiums associated with his current deductibles and then the premiums associated with the highest allowed deductibles.

1. Current Deductibles and Premiums:

   • Collision: $250 deductible costs $415.25 annually.
   • Comprehensive: $50 deductible costs $110.25 annually.
   • Current Monthly Total: $43.79.

2. New Deductibles:

   • For Collision, the highest deductible ($500) costs $275.75 annually.
   • For Comprehensive, the highest deductible ($100) costs $100.00 annually.

3. Calculate New Monthly Premiums:

   • New Collision Premium (monthly): $275.75 / 12 = $22.97.
   • New Comprehensive Premium (monthly): $100.00 / 12 = $8.33.

4. Total New Monthly Premium: Sum of the new premiums:

   • Total New Premium = Collision Premium + Comprehensive Premium
   • Total New Premium = $22.97 + $8.33 = $31.30 (approximately).

5. Impact on Monthly Bill: Current Monthly Bill: $43.79. New Monthly Bill: $31.30.

   Change in Monthly Bill = Current Monthly Bill - New Monthly Bill Change in Monthly Bill = $43.79 - $31.30 = $12.49.

This rounds to approximately $12.48.

Thus, Henry's monthly auto insurance bill will be decreased by $12.48.

Answer:

a. $12.48