The manager of a life insurance company is trying to decide what annual premium to charge a group of policyholders, each of whom has just reached his or her 40th birthday. A check of mortality tables indicates that, for every million persons born 40 years ago, 3 percent die, on average, sometime during their 40th year. If the company has 10,000 policyholders in this age bracket and each has taken out a $50,000 life insurance policy, estimate the probable amount of death benefit claims against the company.
How much must be charged in required premiums to each customer wanting a life insurance policy just to cover these expected claims? Suppose the company has operating expenses (plus a target profit) on policy sales to these policyholders of $500,000. What annual premium must be charged each policyholder to recover expenses and meet expected benefit claims?

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The Answer of The manager of a life insurance company is trying to decide what annual premium to charge a group of policyholders, each of whom has just reached his or her 40th birthday. A check of mortality tables indicates that, for every million persons born 40 years ago, 3 percent die, on average, sometime during their 40th year. If the company has 10,000 policyholders in this age bracket and each has taken out a $50,000 life insurance policy, estimate the probable amount of death benefit claims against the company.
How much must be charged in required premiums to each customer wanting a life insurance policy just to cover these expected claims? Suppose the company has operating expenses (plus a target profit) on policy sales to these policyholders of $500,000. What annual premium must be charged each policyholder to recover expenses and meet expected benefit claims?

The Manager of a Life Insurance Company Is Trying to Decide