Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 12

Life insurance companies require applicants to submit to a physical examination as proof of insurability prior to issuing standard life insurance policies. In contrast, credit card companies offer their customers a type of insurance called "credit life insurance" which pays off the credit card balance if the cardholder dies. Would you expect insurance premiums to be higher (per dollar of death benefits) on standard life or credit life policies? Explain.