Question

Insurance agent Margaret receives life insurance applications from Tim and Tom, who are identical twins, and are each applying for the exact same type of policy with the same face amount. The insurance company issues the policies as applied for, but charges Tom a 15

1) 10%
2) 12%
3) 15%
4) 20%

Answer 1

The insurance company charges Tom a higher premium compared to his identical twin because he is deemed to have a higher risk of mortality of 3) 15%.

Step-by-step explanation:

Insurance agent Margaret receives life insurance applications from Tim and Tom, who are identical twins, and are each applying for the exact same type of policy with the same face amount. The insurance company issues the policies as applied for, but charges Tom a 15% higher premium.

This situation is an example of how insurance companies determine premiums based on individual risk factors. In this case, the insurance company likely analyzed various factors, such as medical history, lifestyle, and other relevant information, and determined that Tom has a higher risk of mortality compared to Tim. As a result, the company charges Tom a higher premium to account for this increased risk.