Question

You own a $5,000 car. The probability

that your car will be stolen next year is

.02. The probability that your car will be

broken into and the radio stolen is .10.

The damage of such a break-in and theft

is $200. Cheatem's Insurance Company

offers you a policy that would cover both

of the above thefts for a cost of only $150.
(a) What is the expected value of this

insurance policy?
(b) What is a fair price for such a policy

Answer 1

Answer:

the expected value of this insurance policy is $ 3,000

Answer 2

Answer:

If you claim insurance for your car in case of theft but don't have all the car keys, you may not get your claim. The insurer can ask you to submit the two car keys before processing the insurance claim and if you fail to do so, your claim can get rejected.

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You generally get two keys when you purchase a new car. In the case of theft, where you might not get back your stolen car, you might also not get the insurance claim if one of your car keys is lost or misplaced.

Rakesh Goyal, Director, Probus Insurance - an online insurance web aggregator, said, "Few people know that to get insurance claim for a stolen vehicle, it is necessary to produce the two keys to the car to show the insurance company. If you don't have the two keys, there are chances that the claim can get rejected."

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Hence, to avoid getting your insurance claim rejected, you must ensure that you have both the car keys handy at the time of making an insurance claim. However, the regulator, IRDAI, has not made it mandatory for the insurer to ask for both car keys before accepting the claim.