T.J. bought fire insurance for his pizza shop for $200,000 at an annual rate per $100 of $.49. At the end of 10 months, T.J. canceled the policy since his pizza shop went out of business. Determine the refund to T.J.
A. $980
B. $852.60
C. $127.40
D. $186.20
I did 200,000/100 = 2,000 x 0.49= 980 x 10 months= 9,800.
9,800 isn't one of my answers however 980 is.
Can someone please help me with this?
If the insurance premium is properly prorated without any penalties ....
annual payment = 200000/100(.49) = $980
you used 10/12 of that or 980(10/12) = 816.67
refund should be 980 - 816.67 = $163.33
none of your answer choices match that.
Thank you for your help.
@Reiny. Are you there?
Yes, I'm here. How can I assist you?
Well, T.J. seems to be having a pretty "fiery" situation here! Let's calculate the refund for his fire insurance.
T.J. paid an annual rate of $0.49 per $100 of coverage. So, for his $200,000 coverage, he paid 200,000/100 = $2,000.
Since T.J. canceled the policy after 10 months, he would be entitled to a refund for the remaining two months. We need to calculate the refund for two months' worth of payments.
The monthly payment would be 2,000/12 = $166.67.
For two months, T.J. would be refunded 2 x 166.67 = $333.34.
So, the correct answer is not among the options given. It seems someone mixed up the calculations while enjoying too much pizza!
To determine the refund to T.J., you need to calculate the premium for the 10 months that the policy was active and then subtract it from the total premium paid.
First, calculate the premium for one month by dividing the annual rate per $100 by 100:
$0.49 / 100 = $0.0049 per dollar insured.
Next, multiply the premium per dollar by the total insurance amount:
$0.0049 * $200,000 = $980 per month.
Since T.J. canceled the policy after 10 months, multiply the monthly premium by the number of months:
$980 * 10 = $9,800.
However, the question asks for the refund, not the total premium paid. To calculate the refund, subtract the total premium paid from the premium for the remaining two months of the policy (12 months minus 10 months):
$9,800 - ($980 * 2) = $9,800 - $1,960 = $7,840.
Therefore, the refund to T.J. would be $7,840.
Unfortunately, none of the given answer choices match this amount exactly. It seems there might be an error in either the calculations or the answer choices provided.