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.

Question

short answer

Answer 1

To calculate how much Max would save on a $75,000 policy if he quit smoking compared to if he continued smoking, we first need to determine the monthly premiums for both scenarios.

Step 1: Calculate monthly premium as a smoker (age 33):

• According to the table, for a male smoker aged 31 to 40, the premium is $9.00 per $25,000.
• For a $75,000 policy, we find how many $25,000 increments are in $75,000: \[ \frac{75,000}{25,000} = 3 \]
• Therefore, the monthly premium as a smoker is: \[ 3 \times 9.00 = 27.00 \]

Step 2: Calculate monthly premium as a nonsmoker (age 33):

• According to the table, for a male nonsmoker aged 31 to 40, the premium is $5.50 per $25,000.
• Using the same number of increments: \[ \frac{75,000}{25,000} = 3 \]
• Therefore, the monthly premium as a nonsmoker is: \[ 3 \times 5.50 = 16.50 \]

Step 3: Calculate annual premiums for both scenarios:

• Annual premium as a smoker: \[ 27.00 \times 12 = 324.00 \]
• Annual premium as a nonsmoker: \[ 16.50 \times 12 = 198.00 \]

Step 4: Calculate the savings from quitting smoking:

• Savings from quitting smoking: \[ 324.00 - 198.00 = 126.00 \]

Therefore, Max would save $126.00 next year on a $75,000 policy if he quit smoking compared to if he continued smoking.