Question

You bought a whole life insurance policy. On December 1 of the year, you die the insurance will pay an amount of 1 (1,000,000€).

If you die on May 12, 2045, your family receives a payout from the insurance policy on December 31, 2045.

You buy the insurance at the beginning of the year (2020). The fair premium is π. Show how to find π.

Answer #1

The whole life insurance policy is bought on 1 January ,2020 (as given in the question)

Suppose I die on Deccember 1,2020 then I will get a premium of Euro 1,000,000.

This means that the premium receiveable in the event of such contingency = Euro 1,000,000

But if I die on May 12,2045 I will have to pay a premium every year till date of death= 25 years

Hence the fair premium is π = Premium to be Recieved/ No of years till death

= Euro 1,000,000/25 yrs = Euro 40,000/ year

Q1: Which of the following represents a disadvantage of a whole
life insurance policy?
A. It is difficult to evaluate the true cost of a whole life
insurance policy at the time of purchase.
B. A whole life insurance policy provides only temporary
coverage for a set period.
C. A whole life insurance policy may require a policyholder to
pay higher premiums when the policy is renewed
D. A whole life insurance policy often provides lower yields
than other investment...

1.A man purchased a $21,000, 1-year term-life insurance policy
for $350. Assuming that the probability that he will live for
another year is 0.985, find the company's expected net gain.
2.A man wishes to purchase a life insurance policy that will pay
the beneficiary $20,000 in the event that the man's death occurs
during the next year. Using life insurance tables, he determines
that the probability that he will live another year is 0.95. What
is the minimum amount that...

On July 1, a company paid the $2,400 premium on a one-year
insurance policy with benefits beginning on that date. What will be
the insurance expense on the annual income statement for the first
year ended December 31?

On April 1, a company paid the $2,550 premium on a three-year
insurance policy with benefits beginning on that date. What amount
of the insurance expense will be reported on the annual income
statement for the year ended December 31?

A 20-year-old female purchases a 1-year life insurance policy
worth $250,000. The insurance company determines that she will
survive the policy period with probability 0.9995.
(a) If the premium for the policy is $300, what is the expected
profit for the company?
(b) At what value should the insurance company set its premium
so its expected profit will be $250 per policy for 20-year-old
females?

And
insurance company sales a one year term life insurance policy to an
80-year-old woman. The woman pays a premium of $1000. If she dies
within one year the company will pay $20,000 to her beneficiary.
According to the US centers for disease control and prevention the
probability that a 80-year-old woman will be a live one year later
is 0.9516. But X be the profit made by the insurance company. Found
the probability distribution in the ass but the...

Curly’s Life Insurance Co. is trying to sell you an investment
policy that will pay you and your heirs $37,000 per year forever. A
representative for Curly’s tells you the policy costs $620,000. At
what interest rate would this be a fair deal? (Do not round
intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.) Interest rate
______________

An insurance company offers a $120,000 term life policy lasting
2 years to a man of average health aged 50. To value the policy,
the company has four conditions: (1) the yearly interest or
discount rate is 4%, (2) the compounding or discounting is done
every 6 months, (3) the premium is made once at the start of a
year, and (4) the payout occurs at the end of a
year. What is the company’s break-even yearly premium?

Answer True or False about Life Insurence:
1) A cost of living rider that you purchase as part of your
insurance life insurance policy gives you the option to buy
additional insurance coverage to compensate for inflation.
2) All variable life insurance policies guarantee a minimum
death benefit.
3) An insurance premium is a fee paid to an insurance company in
exchange for risk protection.
4) I have a $300,000 mortgage. I am paying for two college
tuitions. My salary...

6.3 The Maybe Pay Life Insurance Co. is trying to sell you an
investment policy that will pay you and your heirs $35,000 per year
forever. (1) If the required return on this investment is 4.7
percent, how much will you pay for the policy? (2) Now suppose a
sales associate told you the policy costs $800,000. At what
interest rate would this be a fair deal?
6.4 What happens to the future value of a perpetuity if interest
rates...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 26 minutes ago

asked 29 minutes ago

asked 42 minutes ago

asked 42 minutes ago

asked 48 minutes ago

asked 56 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago