Consider a worker, Janice, who has the option to purchase DI (disability insurance) on the private market. Janice becomes disabled with probability q=0.01. She can purchase DI by paying the premium p. If the Janice is disabled, she will earn no income. But if she is insured, she will receive a total payment of $15,000 from the insurance company (her consumption will be $15,000). If the Janice is not disabled, she earns an income of $20,000. She has utility: U = 3C where C is the amount of consumption. Determine the actuarially fair insurance premium, p*. Write down the expected utility function for Janice if she purchases insurance at the actuarially fair price.
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- Which of the following situations describes a risk exposure that can be most appropriately insured against with an individual disability income policy? A)A self-employed bookkeeper earns $40,000 a year out of a small office located in her neighborhood, and wants to protect her income. B)A lawyer wants to make sure his business overhead expenses are covered if he becomes disabled. C)A couple with a military retirement income manages a self-storage business, and they are compensated with a place to live that is on the premises of the business. D)An accountant's spouse owns the building in which the accounting office is located. All of the practice’s income is used to pay rent and other business expenses, so the accountant has no compensation from the business.Sven was recently quoted on a disability policy with an any occupation definition of disability. Sven does want to buy disability coverage, however, the premium was more than he was willing to pay. Sven has some savings built up as an emergency fund and manages his cash flow quite well, so he knows what premium he can afford without impacting his standard of living. What change could Sven consider that would reduce his premium but allow for coverage to continue to meet his objective? a) He could increase the elimination period of the policy b) He could increase the length of his benefit period. c) He could change the definition to own occupation. d) He could decrease the waiting period.Asap
- Sue is just learning about disability insurance. Which statements are true about disability insurance? I. Disability income insurance pays a monthly benefit in the event that Sue is unable to work as a result of an injury or an illness. II. Disability insurance under regular occupation is a policy that provides benefits if Sue is unable to perform the duties required by her regular occupation. III. Disability insurance under "any occupation" is a policy that provides benefits only if Sue cannot perform the duties of any job that fits her education and experience. IV. Indemnification is the insurance concept of putting Sue back into the same position that she was in prior to the injury or illness. A I, III, and IV II , III, and IV C All responses D I and II E I, Il and IIIYou are a dual-income, no-kids family. You and your spouse have the following debts: Mortgage = $261,000; Auto loan = $10,000; Credit card balance = $2,150; and other debts = $6,200. Further, you estimate that your funeral will cost $9,000. Your spouse expects to continue to work after your death. Using the DINK method, what should be your need for life insurance? Total insurance need $ 288,350Titan completes a $300,000 life insurance application form with his insurance agent Esther. Esther informs him that the insurer will request an attending physicians' statement (APS). Titan inquires about the purpose of an APS. Which of the following is Titan's CORRECT response? Select one correct answer from the list 1. An APS is needed to obtain a summary of Titan's medical history. 2 An APS is needed to obtain a summary of Titan's family medical history. 3. 4. An APS is needed to obtain more information about Titan's lifestyle. An APS is needed to find out why Titan's driver's license was suspended. 000 0
- 31. Your client Marcel has a disability income policy. She falls down her stairs, spraining her back and neck, and the company accepts her disability claim. She is expecting $ 4,000 monthly in benefits. However, she has a $ 2,000 disability benefit with another company How will your company respond? a . Your company will pay $2,667 ( the company's share of the total coverage amount). b . Your company will pay $4,000 (the benefit stated in the policy) C. Your company will pay $ 3,000 (one- half of the entire benefit ). D.Your company will pay nothing because Marcel's disability resulted from an accident in her own home.A 40 year old man in the United States has a 0.199% risk of dying during the next year. An insurance company charges a premium of $429 pays a $166,010 death benefit. What is the expected gain or loss to the man when for a life-insurance policy that purchasing the insurance policy? Hint: Calculate the expected loss of the premium if the man survives (always a negative value), then subtract the premium from the death benefit and calculate the expected gain to the beneficiarles if the man dies (always a positive value), and then add these two numbers to find the net result. A negative net result should be entered as a negative value In the box below. Note: Please avold rounding numbers in the middle of your calculations. However, round your final answer to two decimal places, before entering it in the box below. A negative final answer indicates an expected loss for purchasing the policy.0. Assume that upon graduation you make$63,500per year. What are the legally required costs for Social Security, Old-age, Survivors, and Disability Insurance, \& Medicare for the firm you work for in both dollar values and percentages? How much will you have to pay yourself? How much would you pay if you were self-employed earning the same amount?
- Suppose you have $5,000 as a gift from your parents just after they kicked you out of the house. You have a car, your great grandfather's rare world War 1 commemorative badge collection and you quickly found a place to rent for a while. You work in a factory that has a history of workplace injury and you work near the conveyor belts and other gaint machines. You are single and live by yourself. Based on this information, what types of insurance would you need to purchase? List each type you would need and explain 1-2 sentences why.Karen has been moonlighting as a life coach. This year she made over $65,000 and would like to not realize some of those earnings, maybe in a retirement account. However, she already contributes $6,000 to her qualified retirement plan at her regular employer. What can she do? A : She can contribute some of the $65,000 in a Keogh plan, if she stops participating in her employer’s plan. B : She can contribute some of the $65,000 in an employee stock ownership plan. C : She can contribute some of the $65,000 in a Keogh plan. D : She cannot do anything because she has a qualified retirement plan available at her employer.You have a friend, Icahn Betitall, who just started a small business. He ispaying a hefty premium for insurance. Icahn’s insurance agent told himthat he is insuring against the risk of loss on fire, theft, liability, and businessinterruption. Icahn also has policies for life, health, and automobiles. Icahnis planning a trip to Las Vegas. He plans to contact his agent and obtain apolicy on the risk of losing his money at the blackjack table.a. What should you tell Icahn about being able to purchase such a policy?b. What are several methods that Icahn can choose to manage his risk exposurein Las Vegas?