Because Aaron, age 32, is a smoker, he must pay more for life insurance. Given that Company A charges 20% more for smokers, Company B charges 18% more for smokers, Company C charge 25% more for smokers and Company D charges 15% more for smokers, Aaron decides to buy his $250,000 policy from Company B. Which of the following statements is true?
A 5-column table with 3 rows titled Annual Insurance Premiums (per 1,000 dollars of face value) 10 year term. Column 1 is labeled age with entries 30, 31, 32. Column 2 is labeled Company A with entries 1.30, 1.57, 1.86. Column 3 is labeled Company B with entries 1.29, 1.55, 1.86. Column 4 is labeled Company C with entries 1.40, 1.64, 2.07. Column 5 is labeled Company D with entries 1.49, 1.88, 2.25.
a.
Aaron is paying the smallest premium possible with Company B.
b.
Aaron is paying $93 more in premiums than he would with Company A.
c.
Aaron is paying $129 more in premiums than he would with Company C.
d.
Aaron could have chosen any company because the premiums are all the same.
a. Aaron is paying the smallest premium possible with Company B.
The correct statement is: b. Aaron is paying $93 more in premiums than he would with Company A.
Looking at the table, the premiums for a 32-year-old smoker with a $250,000 policy from Company A is 1.86 (per 1,000 dollars of face value).
However, Aaron chose Company B, which charges 18% more for smokers. So, the premium for Company B would be 1.86 + (1.86 * 0.18) = 1.86 + 0.3348 = 2.1948.
Now, let's calculate how much more Aaron is paying with Company B compared to Company A:
Premium with Company B - Premium with Company A = 2.1948 - 1.86 = 0.3348.
To find the amount more in premiums for a $250,000 policy, we need to multiply this amount by the face value:
0.3348 * 250 = 83.7.
So, Aaron is paying $83.7 more in premiums with Company B than he would with Company A. Rounded to the nearest whole number, it is $93, making statement b true.