An insurance company sells a policy that pays $50,000 in case of accidental death. according to company figures, the rate of accidental death is 47 per 100,000 each year. what annual premium should the company charge for this coverage?

According to the article below, health insurers typically use 80-85% of premiums to pay out claims. I didn't find anything for life insurers, but that's probably good enough. I'll choose 85%, which means the profit would be 15%. This would cover administrative costs plus their actual profit. So, if they sell 100,000 premiums, they would need that revenue to cover 47 * 50,000 = $2,679,000 in pay outs. To cover their profits/admin expenses, etc. they need to make more than that. Assume that $2,679,000 is 85% of what they need to make. 0.85x = $2,679,000 x = $3,151,765 So for 100,000 premiums the price per premium is: $3,151,765/100,000 = $31.52 <ANNUAL PREMIUM is $31.52 Amount of profit: $3,151,765 - $2,679,000 = $472,765 <ANNUAL PROFIT is $472,765