To determine which statement correctly compares the premium prices for the given insurance policies based on their deductibles, let us analyze the relationship between deductibles and premiums:
1. Deductible: The amount the policyholder must pay out-of-pocket before the insurance company pays for the remaining covered losses.
2. Premium: The amount paid by the policyholder to maintain the insurance policy over a certain period.
Generally, insurance policies with lower deductibles have higher premiums, and policies with higher deductibles have lower premiums. This is because the insurance company assumes more risk with a lower deductible, leading to a higher premium for the policyholder.
Now, let's examine the given data:
- Policy 1 has a deductible of \[tex]$2,200.00.
- Policy 2 has a deductible of \$[/tex]2,000.00.
The deductible for Policy 2 (\[tex]$2,000.00) is lower than the deductible for Policy 1 (\$[/tex]2,200.00). Therefore, Policy 2 typically results in a higher premium since it shifts more risk to the insurance company compared to Policy 1.
Based on this understanding, the correct statement is:
D. Policy 2 will have a higher premium because it has a lower deductible than Policy 1.
Thus, the statement that correctly compares the premium prices for these insurance policies is option D.
