If you have a 0.1% probability of having a fire in your house that completely destroys...

If you have a 0.1% probability of having a fire in your house that completely destroys your house (value post-fire =$0), and your house is worth $100,000, how much is the fair premium for fire insurance?

$1
$10
$100
$1,000

Solutions

Expert Solution

Post fire value of house=$0

Loss =$100000

Fair premium= Probability of loss* amount of loss

= 0.1%*$100000

= $100

So, answer= $100

Rahul Sunny answered 1 year ago

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