Discussion
Maybe you have considered buying a term life insurance policy. The expected value of any term life insurance product yields a positive expected value for the insurance company and a negative expected value for you, meaning the insurance company will make profits by selling their insurance products. Would you still buy the term life insurance? Why or why not? Are there other examples other than insurance that uses this same concept?
Please read the attached document on Expected value before proceeding. You will learn the definition of Expected value and see an application. It is possible to use this technique to understand the value of an insurance policy.
In the attached example, we saw how the technique was used for a game. It would be much the same to get the value of an insurance policy. Make a probability table and set the left column to be the monetary events happening for the insurance company, such as keeping the premium or paying a claim. The right column is the probability of the event. As long as we form a probability table, the resulting computation will be the Expected Value.
Do not plagiarize and use in text citations properly.
