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Eleanor paid an annual premium of $2,000 in total coverage for her homeowner's insurance, including $250,000 in damage coverage and $250,000 in liability coverage. Six years into her policy, a tree fell on Eleanor's home and caused $40,000 worth of damage. Eleanor's insurance company paid the claim. Did the cost of the benefit of transferring the risk to the insurance company outweigh the cost of the premium

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jepessoa

Answer:

Yes, the benefit of transferring the risk to the insurance company did outweigh the cost of paying insurance premiums.

During six years Eleanor paid $2,000 per year in insurance premium, totaling $12,000.

After the tree damaged Eleanor's house, the cost of the repairs was $40,000, which is much higher than $12,000.

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