It sounds like you’re trying to get them to maximize the probability of you living to a certain age. It would be better if you could make the incentive more along the lines of maximizing your lifespan. For example, you insure 100 years for $10,000 per year. If you die when you’re 50, then your closest relative gets reimbursed for the remaining 50 years, so they get $500,000 back. Also, you don’t have to set it as constant. For example, you could say that you will pay $10,000 per year until you’re 50, and then $5,000 per year after that. That way, you get more money if you’re not retired. You could also set it so you pay $5,000 per year, but have an additional $5,000 per year before 50 if you’re capable of doing your job. And maybe specify it more so that if you’re disabled your life isn’t worth as much.
I notice that in your example, if the money will pay off tomorrow, they will pay up to the remaining amount to keep you alive one more day.
I just noticed something else that would improve this.
You only really want the money back for when you need to support your family and such. The rest is just to give them incentives. The obvious thing to do would be to have them pay you a certain amount back no matter what so you don’t have to absorb that risk, but that would ruin their incentive. To fix this, add a second company. They pay a portion of your premiums, and if you die, they get the money that you don’t need.
It sounds like you’re trying to get them to maximize the probability of you living to a certain age. It would be better if you could make the incentive more along the lines of maximizing your lifespan. For example, you insure 100 years for $10,000 per year. If you die when you’re 50, then your closest relative gets reimbursed for the remaining 50 years, so they get $500,000 back. Also, you don’t have to set it as constant. For example, you could say that you will pay $10,000 per year until you’re 50, and then $5,000 per year after that. That way, you get more money if you’re not retired. You could also set it so you pay $5,000 per year, but have an additional $5,000 per year before 50 if you’re capable of doing your job. And maybe specify it more so that if you’re disabled your life isn’t worth as much.
I notice that in your example, if the money will pay off tomorrow, they will pay up to the remaining amount to keep you alive one more day.
I just noticed something else that would improve this.
You only really want the money back for when you need to support your family and such. The rest is just to give them incentives. The obvious thing to do would be to have them pay you a certain amount back no matter what so you don’t have to absorb that risk, but that would ruin their incentive. To fix this, add a second company. They pay a portion of your premiums, and if you die, they get the money that you don’t need.