Personal Finance 1st Edition by Jack R. Kapoor

Exercise 29

Calculating Insurance Discounts. Matt and Kristin are newly married and living in their first house. The yearly premium on their homeowner’s insurance policy is $450 for the coverage they need. Their insurance company offers a 5 percent discount if they install dead–bolt locks on all exterior doors. The couple can also receive a 2 percent discount if they install smoke detectors on each floor. They have contacted a locksmith, who will provide and install dead–bolt locks on the two exterior doors for $60 each. At the local hardware store, smoke detectors cost $8 each, and the new house has two floors. Kristin and Matt can install them themselves. What discount will Matt and Kristin receive if they install the dead-bolt locks? If they install smoke detectors? (Obj. 3)

Step 1 of 4

Insurance is a concept of protecting one from the financial loss. It is an investment made to hedge the risk that can occur in future. There are two parties in the insurance, one is insurer, that is the insurance company and the second one is the insured, the person that took the insurance.

The insurance company assumes the risk of the insured for some consideration known as premium.