Respuesta :
The break-even period after which you could make a $10,000 claim for
property damage without the insurance company suffering a loss is 15 months.
What is the break-even point?
The break-even point is the point at which total revenue is equal to the total cost.
Taking only this customer's premiums, deductible, and claims into account, the break-even time during which the client might submit a $10,000 claim for property damage without causing the insurance company a loss is 15 months.
The corporation will not generate a profit or a loss during this break-even time. Therefore, the following Data and Calculations can be made,
Monthly insurance premium payable = $600 (assumed to be paid monthly)
Deductible on the insurance policy = $1,000
Minimum coverage = 30/50/10
Coverage for injury or death to one person = $30,000
Coverage for injury or death to two or more people = $50,000
Coverage for damage to property = $10,000
Average accidents every year = 2
Total claims cost to the insurance before deductibles = $40,000 ($30,000 + $10,000)
Break-even period = 15($10,000 - $1,000)/$600
This break-even period is calculated by subtracting the deductible from the customer's claim and dividing the result by the monthly insurance cost.
Thus, after a 15-month break-even period, the client might file a $10,000 claim for property damage without the insurance company incurring a loss.
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