Answer:
Yes, It is better to buy the insurance.
Step-by-step explanation:
Given Data:
Cost of Health Insurance for a month = 900$ per month
As 20 Years = 20*12 months = 240 months
Cost of Health Insurance for 20 years = 900 * 240
Cost of Health Insurance for 20 years = 216,000$
Insurance claim in case of having dramatic injury = Cost of Dramatic Injury = 500,000$
Insurance claim in case of having no dramatic injury = 0$
Chances of dramatic injury in 20 years = P(A) = 47.3%
Chances of not having dramatic injury in 20 years = P(B) = 100% - 47.3%
Chances of not having dramatic injury in 20 years = P(B) = 52.7%
Expected Insurance Claim for 20 years:
Expected Insurance Claim for 20 years = (Chances of having dramatic injury in 20 years * Insurance claim) + (Chances of not having dramatic injury * Insurance claim)
Expected Insurance Claim for 20 years = P(A) * 500,000$ + P(B) * 0$
Expected Insurance Claim for 20 years = 47.3% * 500,000 + 52.7% * 0
Expected Insurance Claim for 20 years = 236500 + 0
Expected Insurance Claim for 20 years = 236,500$
Expected Profit:
As expected insurance claim is 236,500$ is more than the cost of health insurance for 20 years and we are expected to have profit of 20,500$, thus we should take the health insurance.
