Hello, I would really appreciate help on this problem with a step by step soluti

Question

Hello,

I would really appreciate help on this problem with a step by step solution. Please complete ALL parts of the problem. Thank you so much!

10. Suppose that Fastball Insurance Company offer to provide insurance to baseball players against a career-ending injury. Specifically, if the player's career ends due to a baseball-related injury, then Fastball pays the player to make up for lost income. Explain why Fastball will charge a much lower premium for this insurance if all baseball players are required to purchase it.

Explanation / Answer

The career ending insurance is paid for by the player in order to protect their personal income. It pays out a lumpsum when a player gets injured and can no longer play. It is a financial assistance to the player for rest of their life. Due to this, insurance is expensive and price goes up each year with age. So, many players are hesitant to take the policy. In order to make them buy the policy, fastball will charge a lower premium if all players are required to purchase it.

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