SOLUTION: please help and explain car thieves steal one automobile out of 400 of a certain type every year in a certain city. What annual net premium shoukd an owner pay for theft insurance

Question 40455: please help and explain
car thieves steal one automobile out of 400 of a certain type every year in a certain city. What annual net premium shoukd an owner pay for theft insurance in the amount of $16,000 on the certain type of car?
I dont even understand how you would know what premiums should be????
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
car thieves steal one automobile out of 400 of a certain type every year in a certain city. What annual net premium shoukd an owner pay for theft insurance in the amount of $16,000 on the certain type of car?
Probability of having your "certain type of car" stolen is 1/400.
If the iinsurance company wants to break even it should change
(1/400)(16000)=$40 per premium per year.
They don't want to break even so they must charge more that $40 per premium.
Cheers,
Stan H.
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