Two insurance companies gave the following quotations on premiums for essentially the same long-term disability insurance coverage for a 25-year-old. Paul Revere Insurance Co. quoted monthly premiums of $54.83 from ages 26 to 30 inclusive and $78.17 from ages 31 to 64 inclusive. The monthly premiums from Provident Insurance Co. are "flat" at $69.35 from ages 26 to 64 inclusive. All premiums are paid at the beginning of each month. The insurance broker recommended the Provident coverage because the aggregate lifetime premiums up to the client's 65^th birthday are $32,455.80 versus $35,183.16 for the Paul Revere policy. Is the choice that simple? (Hint: Calculate and compare the economic value on the client's 26^th birthday of each policy's stream of premiums assuming a time value of money of 9% compounded monthly.)

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The Answer of Two insurance companies gave the following quotations on premiums for essentially the same long-term disability insurance coverage for a 25-year-old. Paul Revere Insurance Co. quoted monthly premiums of $54.83 from ages 26 to 30 inclusive and $78.17 from ages 31 to 64 inclusive. The monthly premiums from Provident Insurance Co. are "flat" at $69.35 from ages 26 to 64 inclusive. All premiums are paid at the beginning of each month. The insurance broker recommended the Provident coverage because the aggregate lifetime premiums up to the client's 65^th birthday are $32,455.80 versus $35,183.16 for the Paul Revere policy. Is the choice that simple? (Hint: Calculate and compare the economic value on the client's 26^th birthday of each policy's stream of premiums assuming a time value of money of 9% compounded monthly.)

Two Insurance Companies Gave the Following Quotations on Premiums for Essentially