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Example 2

Sam purchased a new car and has the option between a high deductible or a low deductible car insurance plan. If Sam selects the low deductible plan, he will have to pay the first $250 of any car damage. The low deductible plan costs $840 a year. If Sam selects the high deductible plan, he will have to pay the first $500 of any car damage. The high deductible plan costs $750 a year. In order for Sam to make an informed decision, he found some statistics about common car accidents for his age range. Assume that the table correctly displays the probabilities and costs of total common car accidents within the next year. Including the cost of insurance, what are Sam's expected total car insurance costs with the low deductible plan and high deductible plan? If Sam wants the best plan in the long run and must buy one of the two insurance plans, which plan should he purchase?
This applet is provided by Walch Education as supplemental material for their mathematics programs. Visit www.walch.com for more information.