ABC Insurance offer term life insurance under the following terms:Guaranteed renewalCover to age 75Sum insured remains constantThe indicative monthly premiums for $1 million coverage are as follows:Age21 to 3435 to 3940 to 4445 to 4950 to 54Non-smoker$101$112$148$223$387Smoker$161$225$285$485$808 Why do the premiums increase as the age of the insured increases? In percentage terms, approximately how much more expensive is term life insurance for a smoker than a non-smoker? If the renewal of the policy was at the discretion of the insurer, would you expect the premiums to be higher or lower? Why?If the sum insured was indexed to CPI, would you expect the premiums to be higher or lower? Why? If the term of the insurance was to age 65 rather than age 75, would you expect the premiums to be higher or lower? Why? Andrea and her husband are both 45, non-smokers and considering term life insurance. Ashleigh believes she is being discriminated against by being asked to pay the same premium as her husband. Why does she hold this view? Do you agree?

Why do the premiums increase as the age of the insured increases? Life insurance is a…

Answered: ABC Insurance offer term life insurance…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

ABC Insurance offer term life insurance under the following terms:

The indicative monthly premiums for $1 million coverage are as follows:

Why do the premiums increase as the age of the insured increases?
In percentage terms, approximately how much more expensive is term life insurance for a smoker than a non-smoker?
If the renewal of the policy was at the discretion of the insurer, would you expect the premiums to be higher or lower? Why?
If the sum insured was indexed to CPI, would you expect the premiums to be higher or lower? Why?
If the term of the insurance was to age 65 rather than age 75, would you expect the premiums to be higher or lower? Why?
Andrea and her husband are both 45, non-smokers and considering term life insurance. Ashleigh believes she is being discriminated against by being asked to pay the same premium as her husband. Why does she hold this view? Do you agree?

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