An insurance company has written two life insurance policies for a husband and w
ID: 3060862 • Letter: A
Question
An insurance company has written two life insurance policies for a husband and wife. Policy 1 pays $10,000 to their children if both husband and wife die during this year. Policy 2 pays $100,000 to the surviving spouse if either husband or wife dies during this year. The probability that the husband will die this year is .011. The probability that the wife will die this year is .008. Find the probability that each policy will pay a benefit this year. Assume that the deaths of husband and wife are independent
Explanation / Answer
Probability that policy 1 will pay a benifit = probability that both husband AND wife die = P(husband die)*P(wife die) = 0.011*0.008 = 0.000088.
Probability that policy 2 will pay a benifit = probability that both husband OR wife die
= P(husband die)+P(wife die) = 0.011+0.008 = 0.019.
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