Taking into consideration that expected value of any term life insurance product yields a positive expected value for the insurance company and a negative expected value for customers, do you think everyone should buy a life insurance and why?
Added by Agust-N V.
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The expected value of a term life insurance product is positive for the insurance company and negative for customers. This means that, on average, the insurance company will make a profit, while customers will pay more in premiums than they will receive in Show more…
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Maybe you have considered buying a term life insurance policy. The expected value of any term life insurance product yields a positive expected value for the insurance company and a negative expected value for you, meaning the insurance company will make profits by selling their insurance products. Would you still buy the term life insurance? Why or why not? Are there other examples other than insurance that uses this same concept?
Prashant B.
Life Insurance: Your company sells life insurance. You charge a 55 year old man $70 for a one year, $100,000 policy. If he dies over the course of the next year you pay out $100,000. If he lives, you keep the $70. Based on historical data (relative frequency approximation) the average 55 year old man has a 0.9998 probability of living another year. (a) What is your expected profit on this policy? $ (b) What is an accurate interpretation of this value? It represents the average profit per policy sold that you would expect if you sold a lot of these policies. It represents the loss on every policy sold. It is meaningless because the insurance company never makes this amount on a policy. It represents the profit on every policy sold
Dominador T.
An insurance company will sell a $\$ 90,000$ one-year term life insurance policy to an individual in a particular risk group for a premium of $\$ 478$. Find the expected value to the company of a single policy if a person in this risk group has a $99.62 \%$ chance of surviving one year.
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