Question

You have realised that instead of reducing your car's short-term insurance ium as its book value decreases, your insurer has actually increased the premium % per year "to keep up with inflation". If your premium started off at R450 per month. have you paid in total after 2 years?​

Answer 1

To calculate the total amount paid over two years, we first need to determine the annual premium increase percentage. Let's assume the insurer increases the premium by 5% per year to keep up with inflation.

After the first year, the new premium would be:

R450 + (5% of R450) = R472.50 per month

After the second year, the new premium would be:

R472.50 + (5% of R472.50) = R496.13 per month

To calculate the total amount paid over two years, we can use the following formula:

Total amount paid = (monthly premium x 12 months x number of years)

= (R450 x 12 x 2) + (R472.50 x 12 x 1) + (R496.13 x 12 x 1)

= R10,800 + R5,670 + R5,953.56

= R22,423.56

Therefore, you would have paid a total of R22,423.56 over two years.