# A 28-year-old man pays $165 for a one-year life insurance policy with coverage of $140000. If the probability that he will live through the year is 0.994, what is the expected value of the insurance policy?

##### 1 Answer

Nov 2, 2015

$675.99

#### Explanation:

Here, the insurance premium paid is $165.

the probability of survival is 0.994.

the probability of death is 0.006

X is the value of insurance.

The company earns $165 with probability 0.994 and pays out $140000 with probability .006.

expected value of the policy or the expected earning for the company through this policy is worked out as

165 x 0.994 - 140000 x 0.006

164.01 - 840 = - 675.99

i.e the company will lose $675.99