Question

Question 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 Chloe is 25 and smokes. How much would she save a year on a $100,000 policy if she quit smoking? Show your work or explain how you got your answer. (4 points)

Answer 1

To determine how much Chloe would save a year on a $100,000 life insurance policy if she quit smoking, we need to find the monthly premiums for both her current smoking status and the nonsmoking status.

1. Determine the premium while smoking:

   • Chloe is 25 years old and smokes, so we look at the "Smoker Female" column for the age 24 to 30 range:
   • Smoker Female Premium: $5.25 for every $25,000 of coverage.
   • Since her coverage is for $100,000, we divide the coverage amount by $25,000: \[ \frac{100,000}{25,000} = 4 \]
   • Therefore, she would pay: \[ 5.25 \times 4 = 21.00 \text{ (monthly premium while smoking)} \]

2. Determine the premium while nonsmoking:

   • Now we look at the "Nonsmoker Female" column for the age 24 to 30 range:
   • Nonsmoker Female Premium: $3.50 for every $25,000 of coverage.
   • Using the same calculation for coverage of $100,000: \[ 3.50 \times 4 = 14.00 \text{ (monthly premium while nonsmoking)} \]

3. Calculate the monthly savings:

   • To find her savings per month if she quits smoking, we simply subtract the nonsmoking premium from the smoking premium: \[ 21.00 - 14.00 = 7.00 \]
   • Therefore, Chloe would save $7.00 per month.

4. Calculate the annual savings:

   • To find out how much she would save in a year, we multiply the monthly savings by 12 (months in a year): \[ 7.00 \times 12 = 84.00 \]

Thus, Chloe would save $84.00 per year if she quit smoking.