Insurance Risk Calculator

Pre-Algebra · Axiom Academy

LESSON Insurance Risk Calculator Why does one driver pay 100 a month and another pay 300 for the same coverage? Insurers don't guess — they run the numbers. Imagine 100 drivers just like you. If the company expects 25 of them to file a claim this year, then your claim probability is . Watch the grid fill: every driver is either a claim or a no-claim — there's no third option, so the two slices must always cover the whole group. The two chances always add to 100% — this is the complement rule . Every driver starts from the same base rate — here, 100 a month. The company then multiplies it by a risk multiplier that grows with your claim probability. Watch the dial sweep from low risk to high risk: the bar stretches , and the premium is just the base rate scaled by the multiplier. A multiplier below 1 pulls the premium under the base rate — a safe driver pays less than the starting price. A multiplier above 1 pushes the premium above the base rate — a risky driver pays more. Teen driver — 20% claim probability, multiplier 2.0 : Premium 100 \, 2.0 = 200 / month. Middle-age driver — 8% claim probability, multiplier 0.8 : Premium 100 \, 0.8 = 80 / month. Same base rate, same coverage — the multiplier is the whole difference. 3. Balancing Coverage and Cost

This is the written version of the interactive lesson above. See the full Pre-Algebra course.