Decision_of_Uncertainty

Running head: A Decision of Uncertainty A Decision of Uncertainty Alvin L Harris University of Phoenix-Little Rock 9-14-2009 Decision: To purchase or not to purchase rental insurance I have been puzzling over this decision for quite some time, over the past three years I purchased rental car due to my car being damaged in an accident. I have had to use the rental car for an extended period of time. During this time the question has come up of whether or not to purchase insurance from the rental agency or use my own car insurance in its place. I gathered information from different sources in the car rental industry to help support my decision. Research Before buying coverage from a rental agency or using your own car insurance, it’s wise to make certain that you have enough coverage to pay for costly repairs if you should happen to suffer an accident in a rental car. (www.insure.com, 2009) When renting, familiarize yourself with all your insurance options. If you already have car insurance, call your agent and find out if there is enough coverage on your existing policy. Another option is to check your credit card company: many offer coverage when you charge the rental on their particular card. In either case, these two options may be cheaper than purchasing insurance at the counter. (www.insure.com, 2009) The type of car insurance that is purchased, along with the deductibles, usually apply to car rentals as well. Assuming that collision coverage was purchased, the coverage will apply to any car that you drive. However, many auto insurance policies say that your collision insurance is “excess” to any other coverage, meaning that any coverage you buy from the rental car company kicks in first. Also, your personal coverage requires you to pay a deductible before the insurance company picks up the tab. The deductible can be $250 to $500 dollars depending on the type of insurance that you have. (www.insure.com, 2009) Rental car companies sell many types of insurance that broaden your liability protection and relieve you from the responsibility of paying for a wrecked rental. Loss Damage Waivers (LDW) and Collision Damage Waivers (CDW) from the rental company essentially take the place of your own collision and comprehensive insurance, letting you off the hook if the rental is lost or stolen or vandalized or if you crash it. Some LDWs include the CDW, and some waivers require you to pay a deductible just like your comprehensive and collision insurance. According to Illinois statute, your coverage may become void if the accident is caused by you when you were speeding, driving under the influence or some other wreck less error on your part. (www.insure.com, 2009) The waivers are not insurance products because they are not underwritten or sold by an insurance company. It is the rental car company’s version of comprehensive and collision insurance. If you already have comprehensive and collision insurance for your own car, don’t duplicate coverage that you already have. But if you have dropped your comprehensive and collision coverage or don’t have auto insurance, it’s worth the money. According to Ill, this coverage generally ranges from $9 to $19 per day. (www.insure.com, 2009) There are also Additional Liability Insurance supplements. If you are worried that your own auto policy has low liability limits, you can purchase extra coverage for about $7 to $14 per day according to Ill. It will cover you for up to $1 million if you cause the accident, damage property or injure others. If you purchase this insurance from the rental company, it becomes your primary liability insurance. (www.insure.com, 2009) Interpretation of data I picked Baye’s Therom to interpret my data. After compiling my data I feel that this is the best possible avenue to take in order to provide the correct statistical data needed to support my decision on whether to purchase or not to purchase car rental insurance. During my research it was found that only 30 percent of the customers purchase car rental insurance. This consequently means that 70 percent of the customer don’t purchase it or prefer to use their own car insurance instead. I set the variables to examine the probability of Customer 1 = C1 = involved in an accident Customer 2 = C2 = not involved in an accident What I knew: After doing further research I found out that there was a 64 percent chance of being in an accident while on a daily commute. That means that 36 percent chance that you are not involved in an accident. So if there was a 64 percent chance of being in an accident it is written (P(C1)=.64) and (P(C2=.36) P(C1/B) = P(C1)P(B|C1) _________________________ P(C1)P(B|C1) + P(C2)P(B|C2) = (.36)(.64) = .23 =.52 (.36)(.64) + (.70)(.30) .44 |Event |Prior Probability |Conditional |Joint Probability |Posterior Probability | | |P(Ci) |Probability |P(Ai and B) |P(Ai|B) | | | |P(B|Ci) | | | |Involved in an accident |.64 |.30 |.23 |.23/.67= | | | | | |.52 | |Not involved in an |.37 |.70 |.44 |.44/.67= | |accident | | | |.66 | | | | |P(B)=.67 |1.18 | Decision Based on the statistical research I chose to save some money and use my own car insurance instead of purchasing it at the counter. References www.insure.com. Information downloaded September 14, 2009.