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Calculate the expected value of loss for each event

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Reference no: EM132525663

Question - Your home (building) is insured for $650,000 and your insurance company has noted that you live in a fire prone area where the probability of a fire is 30%.

Your home contents are insured for $210,000 and your insurance company has noted that the probability of loss is 60%.

Required -

a) Calculate the expected value of loss for each event?

b) Based on the results of your calculation discuss which event presents a greater risk to the insurer.

c) If the insurer is expecting a loss to occur, discuss why the insurance company still decides to provide the insurance cover?

Reference no: EM132525663

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