Donna,who is single and 30 years old,received several speeding tickets recently and was shocked by the effect they had on her auto insurance.Donna drives a 2002 Pontiac Firebird.She is currently not covered by health insurance,has an emergency fund of $25,000,an income of $100,000 per year,and an investment portfolio of $230,000.She is trying to reduce the price of her auto insurance.Which of the following actions is most likely to help Donna reduce the price of her auto insurance?
A)Maintaining her liability limits at current levels
B)Raising her medical payments coverage
C)Raising her deductible from $250 to $1,000
D)Maintaining her collision coverage at current levels
E)Raising her collision coverage by $10,000

Question

Quizplus · Accepted Answer

Raising the deductible from $250 to $1,000 will increase the amount Donna would have to pay out of pocket in the event of an accident or claim, but it will also reduce the cost of her auto insurance premium. By choosing a higher deductible, Donna is essentially taking on more risk herself, which means the insurance company is less likely to have to pay out a large sum in the event of a claim. This reduced risk for the insurer often translates to lower premiums for the policyholder. Additionally, having a higher deductible can encourage drivers to be more cautious on the road, as they are less likely to want to file a claim for a minor accident or incident.

Donna,who Is Single and 30 Years Old,received Several Speeding Tickets