A 28-year-old man pays $165 for a one-year life insurance

Damian Kerr

Damian Kerr

Answered question

2022-02-11

A 28-year-old man pays $165 for a one-year life insurance policy with coverage of $140000. If the probability that he will live through the year is 0.994, what is the expected value of the insurance policy?

Answer & Explanation

Deacon Osborn

Deacon Osborn

Beginner2022-02-12Added 18 answers

Answer: $675.99
Here, the insurance premium paid is $165.
the probability of survival is 0.994.
the probability of death is 0.006X is the value of insurance.
The company earns $165 with probability 0.994 and pays out $140000 with probability .006. expected value of the policy or the expected earning for the company through this policy is worked out as 165×0.994140000×0.006
164.01840=675.99
i.e the company will lose $675.99

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