Susie is thinking about changing her auto insurance policy at Fret-No-More Auto Insurance. Her current policy includes the following options: $50/100,000 limit for bodily injury, $25,000 limit for property damage, $250 deductible for collision, and $50 deductible for comprehensive. Which of the following changes would increase Susie’s limits the most without increasing her monthly premium by more than $5.00?

Fret-No-More Auto Insurance
Type of Insurance Coverage
Coverage Limits
Annual Premiums
Bodily Injury
$25/50,000
$21.35

$50/100,000
$32.78

$100/300,000
$42.10

Property Damage
$25,000
$115.50

$50,000
$142.44

$100,000
$193.78

Collision
$100 deductible
$490.25

$250 deductible
$343.33

$500 deductible
$248.08

Comprehensive
$50 deductible
$105.79

$100 deductible
$88.23

a.
Increase coverage on bodily injury to $100/300,000.
b.
Increase coverage on property damage to $50,000.
c.
Increase coverage on bodily injury to $100/300,000 and on property damage to $50,000.
d.
Increase coverage on bodily injury to $100/300,000 and on property damage to $100,000.

1 answer

To determine which option increases Susie’s limits the most without exceeding a $5.00 increase in her monthly premium, we first need to establish what her current annual premium is and how it compares to the options available.

Current Policy:

  1. Bodily Injury: $50/100,000 - $32.78 (annual)
  2. Property Damage: $25,000 - $115.50 (annual)
  3. Collision: $250 deductible - $343.33 (annual)
  4. Comprehensive: $50 deductible - $105.79 (annual)

Current Total Annual Premium:

  • Bodily Injury: $32.78
  • Property Damage: $115.50
  • Collision: $343.33
  • Comprehensive: $105.79

Calculating the total: 32.78+115.50+343.33+105.79=597.40 (annual)

Current Monthly Premium: 597.401249.78

Adding $5 results in: 49.78+5=54.78 (monthly)

Available Options:

Next, we’ll evaluate each option against the allowed increased monthly premium of $54.78.

a. Increase coverage on bodily injury to $100/300,000.

  • New Premium: $42.10 (annual)
  • Change: $42.10 - $32.78 = $9.32 (annual)

New Total Premium: 597.40+42.1032.78=606.72 (annual)606.721250.56 (monthly) Increase in coverage: 100,000 increase in bodily injury from 50,000 limit to 300,000.

b. Increase coverage on property damage to $50,000.

  • New Premium: $142.44 (annual)
  • Change: $142.44 - $115.50 = $26.94 (annual)

New Total Premium: 597.40+142.44115.50=624.34 (annual)624.341252.03 (monthly) Increase in coverage: 25,000 increase in property damage (from $25,000 to $50,000).

c. Increase coverage on bodily injury to $100/300,000 and on property damage to $50,000.

  • New Premium Total:
    • Bodily Injury: $42.10 (annual)
    • Property Damage: $142.44 (annual)

Sum of changes: Change in Bodily Injury: $42.10 - $32.78 = $9.32 (annual) Change in Property Damage: $142.44 - $115.50 = $26.94 (annual) Total change = $9.32 + $26.94 = $36.26 (annual)

New Total Premium: 597.40+42.10+142.4432.78115.50=633.66 (annual)633.661252.80 (monthly) Increase in coverage: 100,000 increase in bodily injury up to 300,000 + 25,000 in property damage.

d. Increase coverage on bodily injury to $100/300,000 and on property damage to $100,000.

  • New Premiums:
    • Bodily Injury: $42.10 (annual)
    • Property Damage: $193.78 (annual)

Sum of changes: Change: (9.32 + 78.28= 36.26 + 78.28 Total: $65.72 (annual)

New Total Premium: 597.40+42.10+193.7832.78115.50=686.78 (annual)686.781257.23 (monthly)

Summary of Increases:

  • a: +$100,000 bodily injury, $50.56.
  • b: +$25,000 property damage, $52.03.
  • c: +$100,000 body, +$25,000 property damage, $52.80.
  • d: +$100,000 body, +$75,000 property damage, $57.23.

Best Option: Option b - Increase coverage on property damage to $50,000 gives the most increase without exceeding the $5.00 increase in the monthly premium.

Select: b. Increase coverage on property damage to $50,000.