As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However, her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash flows. Which one of the following examples best illustrates Mehmet's point?
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However, her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash flows. Which one of the following examples best illustrates Mehmet's point?
A. Ciara finds it difficult to come up with a $787 auto insurance premium every six months.
B. Ciara needs her car to get to her job, and she needs her job to make car payments and pay for her car insurance.
C. When her car's transmission goes out a month after the warranty expires, Ciara is faced with an $1,100 repair bill.
D. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
Answer: D. Since the windshield loss is covered, the financial effect on Ciara's cash flow is reduced to the amount of her deductible.