Commercial Contractor Practice Exam

To determine how much the contractor saves over three years with a defined safety program, you begin by calculating the standard premiums without the discount. The standard rate is $8 per $1,000 of coverage. If the contractor has $300,000 in coverage, you can calculate the annual premium as follows:

1. Determine how many thousands of dollars are in the coverage amount:

\[

300,000 \div 1,000 = 300

\]

2. Multiply the number of thousands by the standard rate:

\[

300 \times 8 = 2,400

\]

Therefore, the annual premium without any discount is $2,400.

3. For three years, the total premium without a discount would be:

\[

2,400 \times 3 = 7,200

\]

Next, calculate the discount provided by the insurer for having a defined safety program. A 20% discount on the annual premium means:

4. Calculate the discount amount:

\[

2,400 \times 0.20 = 480

\]

5. The total premium with the discount for one year is:

\[