Question

susie is thinking about changing her auto insurance policy at fret - no - more auto insurance. her current policy includes the following options: $50/100,000 limit for bodily injury, $25,000 limit for property damage, $250 deductible for collision, and $50 deductible for comprehensive. which of the following changes would increase susies limits the most without increasing her monthly premium by more than $5.00?
type of insurance coverage coverage limits annual premiums
bodily injury $25/50,000 $21.35
$50/100,000 $32.78
$100/300,000 $42.10
property damage $25,000 $115.50
$50,000 $142.44
$100,000 $193.78
collision $100 deductible $490.25
$250 deductible $343.33
$500 deductible $248.08

Explanation:

Step1: Calculate monthly premium increase limits

The maximum monthly premium increase is $5.00. So the maximum annual premium increase is $5\times12 = 60$.

Step2: Analyze bodily - injury options

Current bodily - injury limit is $50/100,000 with an annual premium of $32.78. Moving to $100/300,000 limit has an annual premium of $42.10. The increase in annual premium is $42.10 - 32.78=9.32$ which is within the limit. The increase in limits is significant.

Step3: Analyze property - damage options

Current property - damage limit is $25,000 with an annual premium of $115.50. Moving to $50,000 limit has an annual premium of $142.44. The increase in annual premium is $142.44 - 115.50 = 26.94$. Moving to $100,000 limit has an annual premium of $193.78. The increase from $25,000 limit is $193.78 - 115.50=78.28$ which exceeds the $60$ annual increase limit.

Step4: Analyze collision options

Decreasing the deductible (which is not increasing the limit in the traditional sense of coverage amount) would increase the premium. Going from $250$ deductible to $100$ deductible, the premium increases from $343.33$ to $490.25$, an increase of $490.25 - 343.33 = 146.92$ which is well above the limit. Going from $250$ deductible to $500$ deductible decreases the premium but also decreases the insurance company's exposure, not increasing the limit.

Answer:

Increase the bodily - injury limit to $100/300,000$