Use the table to answer the question.
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.
To answer this question, we need to determine the monthly premium for a $75,000 policy for a smoker and a nonsmoker, and then calculate the difference between the two premiums.
According to the table, for a smoker male aged 31 to 40, the monthly premium for every $25,000 of coverage is $9.00. Since Max is 33, this rate is applicable to him.
To calculate the premium for a $75,000 policy for a smoker like Max, we need to multiply the monthly premium rate by the number of $25,000 increments in the policy amount. In this case, there are three $25,000 increments in a $75,000 policy.
So, for a smoker male like Max, the monthly premium for a $75,000 policy would be:
$9.00 x 3 = $27.00
According to the table, for a nonsmoker male aged 31 to 40, the monthly premium for every $25,000 of coverage is $5.50. Again, since Max is 33, we can use this rate for him as a nonsmoker.
To calculate the premium for a $75,000 policy for a nonsmoker like Max, we need to multiply the monthly premium rate by the number of $25,000 increments in the policy amount. Again, there are three $25,000 increments in a $75,000 policy.
So, for a nonsmoker male like Max, the monthly premium for a $75,000 policy would be:
$5.50 x 3 = $16.50
To determine how much Max would save next year on a $75,000 policy if he quit smoking compared to if he continued smoking, we need to calculate the difference between the premiums for a smoker and a nonsmoker.
Difference = Smoker Premium - Nonsmoker Premium
Difference = $27.00 - $16.50
Difference = $10.50
Therefore, if Max quit smoking, he would save $10.50 per month on his $75,000 policy compared to if he continued smoking.
Well, Max is 33 and he smokes. According to the table, the premium for a smoker male aged 31 to 40 for $25,000 coverage is $9.00. Since Max wants a $75,000 policy, we need to calculate the premium for that.
For a $75,000 policy, the premium would be $9.00 x 3 = $27.00 per month.
Now, if Max quit smoking, he would be considered a nonsmoker male aged 31 to 40. According to the table, the premium for a nonsmoker male aged 31 to 40 for $25,000 coverage is $5.50.
For a $75,000 policy, the premium for a nonsmoker male would be $5.50 x 3 = $16.50 per month.
To find out how much Max would save next year if he quit smoking, we need to calculate the difference between the premiums for a smoker and nonsmoker for a $75,000 policy.
The difference would be $27.00 - $16.50 = $10.50 per month.
Therefore, Max would save $10.50 x 12 = $126.00 next year if he quit smoking.
And remember, Max, not only would you save money on insurance, but you'd also save on breath mints!
To calculate the potential savings for Max if he quit smoking compared to if he continued smoking on a $75,000 policy, we need to determine the monthly premium for each scenario and multiply it by 12 to get the annual premium.
1. For a nonsmoker male, the premium for every $25,000 of coverage is $3.00, according to the table. Therefore, for a $75,000 policy, the monthly premium for a nonsmoker male is:
$3.00 x (75,000 / 25,000) = $9.00
The annual premium for a nonsmoker male would be:
$9.00 x 12 = $108.00
2. For a smoker male, the premium for every $25,000 of coverage is $4.50, according to the table. Therefore, for a $75,000 policy, the monthly premium for a smoker male is:
$4.50 x (75,000 / 25,000) = $13.50
The annual premium for a smoker male would be:
$13.50 x 12 = $162.00
To calculate the potential savings, we subtract the premium for a nonsmoker male from the premium for a smoker male:
$162.00 - $108.00 = $54.00
Therefore, Max would save $54.00 next year on a $75,000 policy if he quit smoking compared to if he continued smoking.
Max is in the 24 to 30 age bracket, so for a $25,000 policy, his monthly premium as a smoker would be $6.15.
To calculate his monthly premium for a $75,000 policy, we need to multiply $6.15 by 3 (since he is getting coverage for 3 times the amount).
$6.15 x 3 = $18.45
So Max's monthly premium for a $75,000 policy as a smoker would be $18.45.
If Max quit smoking, he would be charged the nonsmoker rate. For a $75,000 policy in the 24 to 30 age bracket, the monthly premium for a nonsmoker is $3.50.
Again, we need to multiply by 3 to get Max's monthly premium for a $75,000 policy:
$3.50 x 3 = $10.50
So Max's monthly premium for a $75,000 policy as a nonsmoker would be $10.50.
To calculate how much Max would save in a year, we need to subtract the smoker premium from the nonsmoker premium and then multiply by 12 (for the 12 months in a year):
($18.45 - $10.50) x 12 = $93.60
So Max would save $93.60 per year if he quit smoking and got a $75,000 life insurance policy.