What are your expected costs with and without the seawall

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Reference no: EM131989928

You own a house worth $400,000 that is located on a river. If the river floods moderately, the house will be completely destroyed. This happens once every 50 years. If you build a seawall, the river would have to flood heavily to destroy your house, which happens once every 200 years. What would be the annual premium for an insurance policy that offers full insurnace? For a policy that pays only 75% of the home value, what are your expected costs with and without the seawall? Do the different policies provide an incentive to be safer (i.e., to build a seawall)?

Reference no: EM131989928

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