FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
ABC Insurance offer term life insurance under the following terms:
- Guaranteed renewal
- Cover to age 75
- Sum insured remains constant
The indicative monthly premiums for $1 million coverage are as follows:
|
Age |
21 to 34 |
35 to 39 |
40 to 44 |
45 to 49 |
50 to 54 |
|
Non-smoker |
$101 |
$112 |
$148 |
$223 |
$387 |
|
Smoker |
$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?
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