(Scenario: Hurricane Coverage in Southern Florida) Use Scenario: Hurricane Coverage in Southern Florida. Suppose that an insurance company offers you hurricane insurance. MOST likely, this insurance would require a premium payment:
Scenario: Hurricane Coverage in Southern Florida
Suppose that you own a home, estimated to be worth $250,000, that is located in the hurricane belt of southern Florida. The probability that you will lose your home to a hurricane is 30%.

Question

Quizplus · Accepted Answer

Since the probability of losing your home to a hurricane is 30%, the amount of insurance coverage for hurricane insurance should be greater than the potential loss of $75,000 (30% of $250,000). Therefore, the best choice is B, which is greater than $75,000. The other choices are either too low or unnecessarily high.