An insurance company found that 2.4% of male drivers between the ages of 18 and 25 are involved in serious accidents annually. To simplify the analysis, assume that every such accident costs the insurance company $62,000 and that a driver can only have one of these accidents in a year. Complete parts (a) through (c). (a) If the company charges $2,600 for such coverage, what is the chance that it loses money on a single policy? P(loses money) = .024 (Type an integer or a decimal.) (b) Suppose that the company writes 1,000 such policies to a collection of drivers. What is the probability that the company makes a profit on these policies? Assume that the drivers don't run into each other and behave independently. P(profit) = (Round to five decimal places as needed.)

Q: What disclosure is made if a loss contingency is reasonably possible?

A: Contingent Liability: Contingent liability is one form of liability that arises based on a…

Q: Describe what is the assumed liability?

A: An assumed liability is an obligation under the terms of the agreement assumed by a party. Insurance…

Q: Explain when you would issue a reservation of rights?

A: A reservation of rights is generally issued by insurance companies.

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A: We need to compute the annualized cost and then capitalized cost of machine. Annualized cost can be…

Q: difference between ABC method and traditional method

A: Solution:- The following differences between ABC method and traditional method as follows under:-

Q: What must occur if a Significant Deficiency is identified?

A: Definition:   Internal control: Internal control is a process which ensures continuous reliability…

Q: ifference between ABC method and conventional method

A: Solution:- The following differences between ABC method and conventional method (Traditional method)…

Q: When is independence impaired under PCAOB standards?

A: Independence would be considered to be impaired if a covered member accepts more than a token gift…

Q: Which decision is called the abandonment decision?

A: Answer: The decisions relating to the company that provides flexibility to discontinue the project…

Q: Which of the following is not an insurance management tool? Group of answer choices deductibles.…

A: Insurance management: Insurance Management is the administration of all insurance requirements, both…

Q: Explain restricted voting rights

A: There are certain rights given to shareholders of common stock in the company where voting right is…

Q: Define the concept of going concern?

A: Going concern Concept: The basic principle of this concept is that business is assumed to exist for…

Q: Discuss the rules for related party loss limitations.

A: The IRS has define rule regarding the transactions with the related parties and the treatment of…

Q: What is Umbrella Excess Liability?

A: Umbrella Excess Liability policy refers to a liability insurance policy that safeguards the assets…

Q: Unmodified opinion refers to ______

A: In general audit option can be of two major types . They are  a) Unmodified b) Modified Opinion…

Q: What are the limitations on Control Activities?

A: Internal control: Internal control is a process which ensures continuous reliability of…

Q: Describe the process of handling Unequal Service Lives?

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Q: How is the Handling of Unequal Service Lives done?

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A: A contract is an agreement between two or more parties in which one party is bound to perform or not…

Q: When should the defender be replaced?

A: When should the defender be replaced?

Q: What reporting is appropriate for a loss contingency that does not qualify for recording at the…

A: Introduction: A contingency arises when a situation has to be handled in the future but whose…

Q: What are some examples/scenarios of derecognition?

A: Derecognition means to remove or eliminate a financial asset or liability from the company's Balance…

Types of Insurance Contract

Insurance is a contract wherein an individual or entity gets financial protection from the insurance company for any damages or losses incurred. The individual or entity is called the insured, whereas the insurance company is called the insurer. The insured and the insurer enter a legal contract for a fixed term called the insurance term, and the contract is called an insurance policy.