Question 25 • {MDVA} Healthy Living [Semester Only] (M)
Zach is looking for a homeowners insurance policy for his new house. AAA Insurance company has offered him a plan that insures his home annually for $0.36 per $100 of value in the home. In order to make calculations easier, Thompson’s Insurance lists their annual homeowners insurance premium a bit differently, at $3.63 per $1,000 of value in the home. Zach’s house is worth $289,000. What should Zach be thinking as he chooses between the two insurance companies?
Answer
A
$3.63 per $1,000 is approximately the same as $0.36 per $100. The premiums for the two insurance companies will be the same.
B
The annual premium for his house would be cheaper through AAA.
C
The annual premium for his house would be cheaper through Thompson’s.
D
Since the two insurance companies list their premiums differently, the two cannot be compared.
Explanation
Convert AAA’s rate to the same units as Thompson’s: $0.36 per $100 equals $3.60 per $1,000. For a $289,000 home, AAA’s annual premium is 289 × $3.60 = $1,040.40, while Thompson’s is 289 × $3.63 = $1,049.07. Therefore, the annual premium would be cheaper through AAA, as choice b states.
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