Because Bernard has some health issues, he must pay $15 \% more for life insurance. About how much more annually will a $115,000 10-year term insurance at age 35 cost Bernard than someone of the same age without health issues?
| Age | Annual insurance Premiums (per S 1,000 of face value) |
|---|---|
| | 10-Year Term |
| | Male | Female |
| 35 | 1.40 | 2.36 |
| 40 | 1.64 | 1.59 |
| 45 | 2.07 | 2.01 |
A. $161
B. $185
C. $1,073
D. $24
Answer (1)
Calculate the annual premium for a healthy person: $\frac{115000}{1000} \tmes 1.40 = 161 .
Calculate the additional cost due to health issues: $0.15 \tmes 161 = 24.15 .
The additional annual cost for Bernard is $24.15 .
The closest answer from the choices provided is $24 .
Explanation
Find the base premium First, we need to determine the annual insurance premium for a healthy 35-year-old male. According to the table, the annual premium is $1.40 per $1,000 of face value.
Calculate the healthy premium Next, we calculate the annual premium for a healthy person with a $115 , 000 insurance policy. This is done by multiplying the premium per $1 , 000 by the number of thousands in the insurance amount: 1000 115000 × 1.40 = 115 × 1.40 = 161 So, the annual premium for a healthy person is $161 .
Calculate the additional cost Since Bernard has health issues, he must pay 15% more than a healthy person. To find the additional cost, we calculate 15% of the healthy person's premium: 0.15 × 161 = 24.15 Therefore, the additional annual cost for Bernard is $24.15 .
Examples
Understanding the extra cost of insurance due to health issues helps in financial planning. For example, if you know that a certain health condition will increase your insurance premium by 15%, you can budget accordingly. This is also applicable in other areas like car insurance, where factors like driving record can affect the premium. Knowing how these factors influence costs allows for better financial decisions and preparation.
