Question

1. The sample life insurance premium table illustrates the monthly premium for every $25,000 of coverage.

Lydia, a 25-year-old nonsmoker, wants to purchase $100,000 in coverage for herself and $50,000 for her spouse, who is male, 23 years old, and smokes. What will the insurance premium be?

A.
$23.00

B.
$26.30

C.
$32.00

D.
$38.60


2. Using the table, what is the probability of living another year for a man 35 to 44 years of age?

A.
0.994539

B.
0.997359

C.
0.998596

D.
0.986680

(the first table is for question one, and the second table is for question two.)

Answer 1

1. A. $23
2. B. 0.997359

Explanation:

1. The policy rates in the table are for $25000 of insurance. Lydia wants $100,000 of insurance, which is 4 times the amount quoted in the table. Hence her premium will be 4 times the quoted premium. Her spot in the table is in the age 24–30 row and the Female Non-Smoker column. Lydia's premium will be 4×$3.50, or $14 per month.

She wants 2 times the amount quoted in the table ($50,000) of insurance for her spouse, so the premium will be 2 times that quoted in the table. His spot in the table is in the age Under 24 row and the Male Smoker column. The premium for his insurance will be 2×$4.50, or $9 per month.

The total of the two premiums will be $14 = 9 = $23 per month.

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2. The probability of living another year is the complement of the probability of dying. For a 35–44 year-old male, the probability of dying is 264.1/100,000, about 2.641×10^-3. The complement of that is ...

1 - 0.002641 = 0.997359