In a one-year term life insurance, an insurer promises to pay $100,000 at the death of each insured who dies during the year.If past experience indicates that 0.1 percent of a group of young people will die during the year, one death may be expected for every 1,000 persons in the group.If a group of 300,000 is insured, what is the premium amount that the insurer must collect per policyowner? (Assume that premiums are based only on morality)

Question

Quizplus · Accepted Answer

The expected number of deaths is 0.1% of 300,000, which is 300. The insurer needs to collect $100,000 for each expected death, totaling $30,000,000. Dividing this by 300,000 policyholders gives a premium of $100 per policyholder.

In a One-Year Term Life Insurance, an Insurer Promises to Pay