Probability and Life Insurance: life-span and expected loss

[jadeness23]

Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 year.( That is straight death benefit) life insurance e policy until she is 65. The policy will expire on her 65th birthday. The probability of death is given year is provided by the Vital Statistics section of the Statsical Abstract of United States (116 edition).
X = age (yrs) 60 -- 61 - 62 - 63 -- 64
P(death at this age) 0.00756-- 0.00825 -- 0.00896 0.00965 --- 0.01035

Sara is applying to the Big Rock Insurance Company for her term insurance policy.
A. What is the probability that Sara will die in her 60th year? Using the probability that the $50,000 death benefits, what is the expected loss to Big Rock Insurance?
B. Repeat part (A) for years 61, 62, 63 and 64. What would be the total expected loss to Big Rocks Insurance over the years 60 throu

 

[Denis]

Did you read "Read Before Posting!" :?: :?: :?:

Are you a Life Insurance agent?

 

[tkhunny]

Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 year.( That is straight death benefit) life insurance e policy until she is 65. The policy will expire on her 65th birthday. The probability of death is given year is provided by the Vital Statistics section of the Statsical Abstract of United States (116 edition).
X = age (yrs) 60 -- 61 - 62 - 63 -- 64
P(death at this age) 0.00756-- 0.00825 -- 0.00896 0.00965 --- 0.01035

Sara is applying to the Big Rock Insurance Company for her term insurance policy.
A. What is the probability that Sara will die in her 60th year? Using the probability that the $50,000 death benefits, what is the expected loss to Big Rock Insurance?
B. Repeat part (A) for years 61, 62, 63 and 64. What would be the total expected loss to Big Rocks Insurance over the years 60 throu

Each Year is its own Bernoulli Distribution.

Pr(Die at Age 60) = 0.00756
Pr(Die at Age 61) = Pr(Live Through Age 60)*Pr(Die During Next Year) = (1-0.00756)*0.00825
Pr(Die at Age 62) = Pr(Live Through Age 61)*Pr(Die During Next Year) = (1-0.00756)*(1-0.00825)*0.00896
Pr(Die at Age 63) = Pr(Live Through Age 62)*Pr(Die During Next Year) = (1-0.00756)*(1-0.00825)*(1-0.00896)*0.00965
Pr(Die at Age 64) = Pr(Live Through Age 63)*Pr(Die During Next Year) = (1-0.00756)*(1-0.00825)*(1-0.00896)*(1-0.00965)*0.01035
Pr(Die Age 65 or Later) = Pr(Live Through Age 64) = (1-0.00756)*(1-0.00825)*(1-0.00896)*(1-0.00965)*(1-0.01035)

You cannot calculate the expected loss without knowing the premium paid for the policy. I suppose it may mean just the expected payout due to death, but that strikes me as a bit odd.

Note: Never, ever, ever, EVER use population statistics to make decisions about a single individual.