The sample life insurance premium table illustrates the monthly premium for every $25,000 of coverage.
Age Nonsmoker Male Nonsmoker Female Smoker Male Smoker Female
Under 24 $3.00 $2.50 $4.50 $4.00
24 to 30 $4.00 $3.50 $6.15 $5.25
31 to 40 $5.50 $4.40 $9.00 $6.50
41 to 50 $7.50 $6.75 $13.00 $12.00
Max is 33 and smokes. How much would he save next year on a $75,000 policy if he quit smoking compared to if he continued smoking? Show your work or explain how you got your answer.
First, we need to determine the monthly premium for Max's current $75,000 policy as a smoker:
Age range 31 to 40 for smokers:
$9.00 per $25,000 for males $9.00 * 3 = $27.00 per month for smokers
Since Max's coverage is $75,000, the monthly premium for him as a smoker is:
$27.00 * 3 = $81.00 per month
Next, we need to determine the monthly premium for Max if he were a non-smoker:
Age range 31 to 40 for non-smokers:
$5.50 per $25,000 for males $5.50 * 3 = $16.50 per month for non-smokers
Since Max's coverage is $75,000, the monthly premium for him as a non-smoker is:
$16.50 * 3 = $49.50 per month
Therefore, the difference in monthly premiums if Max quit smoking would be:
$81.00 - $49.50 = $31.50
To calculate how much Max would save in a year by quitting smoking, we multiply the monthly savings by 12:
$31.50 * 12 = $378.00 per year
Therefore, Max would save $378.00 in a year on a $75,000 policy if he quit smoking compared to if he continued smoking.