Final answer:
The maximum credit life and health insurance benefit can cover up to 100% of the total debt obligation. When calculating life insurance premiums, actuarial fairness requires adjustments based on risk, which can differ if underwriting does not consider family health history.
Step-by-step explanation:
The total credit life and health insurance benefit can be a maximum of 100% of the total debt obligation. This means the insurance can cover the entire amount that the debtor owes. In the context of an insurance company selling a policy that pays out a benefit to the estate of someone who dies within a specified period, an actuarially fair premium would need to be calculated based on the risk of death for each group if sold separately, or for the whole group if family history of cancer cannot be distinguished.
For those with a family history of cancer, who represent 20% of 1,000 men and have a 1 in 50 chance of dying, and those without a family history who have a 1 in 200 chance of dying, premiums would be calculated differently. When premiums are calculated for the group as a whole without distinguishing these differences, the premium charged may not accurately reflect the individual risks, leading to potential underinsurance or overpricing for certain individuals.