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Distribution Payout Options | Joint Annuitant -50% to Survivor

User Haja
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1 Answer

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Final answer:

In an insurance policy scenario where 20% of 1,000 50-year-old men have a higher mortality rate due to a family history of cancer, an insurer may expect to pay out $400,000 for each subgroup (with and without a history), totaling $800,000.

Step-by-step explanation:

Understanding Insurance Policy Payouts Based on Mortality Rates

When examining a hypothetical group of 1,000 50-year-old men in relation to insurance policies, we can leverage statistical analysis to understand insurance payouts. With 20% having a family history of cancer and a 1 in 50 mortality rate within a year, and the remaining 80% having a 1 in 200 mortality rate, an insurance company selling a policy with a $100,000 payout upon death faces different risks for each subgroup.


For the subgroup with a family history of cancer:

  • Number of men: 200 (20% of 1,000)
  • Mortality risk: 1 in 50
  • Expected deaths: 4 (200 divided by 50)
  • Total expected payout: $400,000 (4 multiplied by $100,000)

For the subgroup without a family history of cancer:

  • Number of men: 800 (80% of 1,000)
  • Mortality risk: 1 in 200
  • Expected deaths: 4 (800 divided by 200)
  • Total expected payout: $400,000 (4 multiplied by $100,000)

Total expected payout for the entire group would therefore be $800,000, which is the sum of the expected payouts from each subgroup.

User Philia Fan
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