E46. Display 6.33 gives the chances that an adult (age 18 or older) living in th

Question

E46. Display 6.33 gives the chances that an adult (age 18 or older) living in the United States will become a victim of the given events Event Accidental injury Personal theft Violent victimization Injury in motor vehicle accident Death Injury from fire Rate per 1000 Adults per Year 386 39 37 50 Display 6.33 Rates of insurable causes of accidents or death per 1000 adults per year Source: U.S. Bureau of Justice Statistics, 2001 ag.ca.gov. a. What should a randomly selected U.S adult be charged yearly for a $100,000 life insurance policy if the insurance company expects to break even? b. What should a randomly selected U.S adult be charged yearly for a policy that pays him or her $10,000 if he or she is the victim of a violent crime? c. An insurance company determines that people are willing to pay $50 a year for a policy that pays them a set amount if they are injured by fire. What should this set amount be if the insurance company expects to break even?

Explanation / Answer

(a) Here death rate = 9/1000

Here if 1000 adults have done its life insurance policy and all of them paying X amount of premium. Then company on expected have to pay 9 adults the insurance amount.

so,

1000X = 9 * 100000

X = $900

(b) Now, Violent crime affected rate = 37

so if 1000 adults will do insurance against violent crime on a premium of X then on an average 37 of them will be affected by it and company has to provide $ 10000 to them.

so,

1000 X = 37 * 10000

X= $ 370

(c) Here the premium amount is $ 50 for fire injury

rate of injury by fire = 0.1/1000

that means in 10000 adults there is a chance that one of them will be affected of fire.

so, Let say X is the amount be set for insurance company to give fire insurance

10000 * 50 = X * 1

X = $ 500000

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