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Make a comparison of the following insurance coverage premium bids and determine from a costing standpoint, which offer is better. Show your calculations: Assume that

Make a comparison of the following insurance coverage premium bids and determine from a costing standpoint, which offer is better. Show your calculations: Assume that you, as a risk manager would like to purchase property insurance on a building. You analyze two insurance coverage bids. The bids are from comparable carriers, the coverage is identical, and the policy limits are the same. The premiums and deductibles, however, differ. Martin's Insurance Co. presents a bid requiring an annual premium of $90,000 with a $5,000 per-claim deductible. Tracey Insurance Co. presents a bid requiring an annual premium of $35,000 with a $10,000 per-claim deductible. You wonder whether the additional $55,000 in premiums is necessary to obtain the lower deductible. As the risk manager, you predict the following losses will occur in the coming year (assume a 5% interest rate): Expected # of Losses / Expected $ of Losses 12 / $5,000 6 / $10,000 2 / >$10,000 n=20

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