Homeowner is purchasing homeowner's insurance. This policy has a $7,000 deductible, so that if you have a
Question:
Homeowner is purchasing homeowner's insurance. This policy has a $7,000 deductible, so that if you have a claim and the damage is less than $7,000 owner pays for it out of pocket. However, if the damage is greater than $7,000, the owner pays the first $7,000 and the insurance pays the remaining balance.
In the current year there is a probability of .079 that owner will have a claim. IF owner have a claim for damages on the home, the damage amount is normally distributed with a mean of $9,000 and a standard deviation of $2,000.
Build a Monte Carlo simulation model to show out-of-pocket expense in this scenario. Use a data table to run 5000 iterations of the model. Analyze the results of the 5000 iterations to find how often a claim was filed and how often the claim amount met or exceeded the deductible. Show both as a percentage of the 5000 iterations.
Which type of distribution was used for the probability of a claim occurring?
Which type of distribution was used for the cost of a claim?
In this model, owner should not experience an out of pocket expense when also experiencing a claim.
As part of analysis of the model, summarize your data table by calculating how often owner experienced a claim and how often the claim amount met or exceeded the deductible. Also include the average & sample std dev for the claim amount.
For the following 2 questions, make a copy of the worksheet on which built the model. need to modify inputs to the model to test calculations. Making a copy of the completed model will keep from having to redo work.
Any easy way to accomplish this is to right-click your model sheet, and choose "Move or copy".
This question will require to alter model to test calculations.
Set the uncertainty for a claim such that a claim happens. Set the Cost of a claim to 8000.
What is the out of pocket expense with these settings?
Set the uncertainty for a claim such that a claim happens. Set the Cost of a claim to 6000.
Which type of distribution did you use for the probability of a claim occurring?
Which type of distribution did you use for the cost of a claim?
In this model, you should not experience an out of pocket expense when also experiencing a claim.
As part of your analysis of yo model, summarize your data table by calculating how often you experienced a claim and how often the claim amount met or exceeded the deductible. Also include the average & sample std dev for the claim amount.
For the following 2 questions, make a copy of the worksheet on which built model. will need to modify inputs to the model to test calculations. Making a copy of completed model will keep from having to redo work.
Any easy way to accomplish this is to right-click your model sheet, and choose "Move or copy".
This question will require to alter your model to test calculations.
Set the uncertainty for a claim such that a claim happens. Set the Cost of a claim to 8000.
What is the out of pocket expense with these settings?
Set the uncertainty for a claim such that a claim happens. Set the Cost of a claim to 6000.