Insurance Expected Value Questions
After the policy is fully paid up the company plans to use the cash value to pay your premium until you die.
Insurance expected value questions. Well his expected total cost of insurance including medical costs is lower with the low deductible plan. If you take the cash value out the insurer will require you to pay the premium or reduce the amount of the death benefit so the remaining cash value will support. This means that if you ran a probability experiment over and over keeping track of the results the expected value is the average of all the values obtained. Department of health and human services.
Mean expected value of a discrete random variable our mission is to provide a free world class education to anyone anywhere. Which once again you shouldn t use these videos as insurance advice. Of this the company must pay a large percent for salaries and overhead. The expected value can really be thought of as the mean of a random variable.
Life insurance policies often have an investment component to them. Insurance example an insurance company charges 150 for a policy that. Insurance to value is a concept used by insurers to determine how much to pay for losses are covered under homeowners policies. Statistics q a library expected value for life insurance there is a 0 9986 probability that a randomly selected 30 year old male lives through the year based on data from the u s.
The insurance company can expect to gross 30 000 000 in premiums on. Get help with your expected value homework. So this one he should go with the low low deductible. In general insureds are required to have coverage in an amount that is at least 80 as much as the value of their home.
The expected value for the insurance company is the same except the perspective is switched. If the expected value of an investment is too low compared to the risk of making this investment it may be viewed as a bad decision. If the male does not survive the year the policy pays out 100 000 as. However if the risk is low enough and the expected value high enough then the particular investment may be viewed more favorably.
Access the answers to hundreds of expected value questions that are explained in a way that s easy for you to understand. 14 insurance example 2. Instead of 260 per year it is 260 per year. Khan academy is a 501 c 3 nonprofit organization.
What is the expected value of the policy to the insurance company. A fidelity life insurance company charges 161 for insuring that the male will live through the year. That the probability of a major accident is 0 005 and the probability of a minor one is 0 08.
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