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May 17th, 2012, 07:04 PM   #1
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How to divide insurance payout fairly

Hi everyone, I have posted my question that was meant for this area but I do not how to move it here and I do not know how to retrieve my draft so I just briefly ask the following financial question to you guys and hope you could help me.
"X paid first 4 years of premium (say $200/year=$800) and left all the bonuses and entitlement that he got yearly from year 1 to year 11 there. Y helped x pay same amount for the remainder 7 years (year 5 - 11=$1400). Y also did the same with the bonuses and entitlement. At year 12 the insurance made a payment of say $500,000 that consist of a lump sum $380,000 plus $120,000 bonuses and entitlement. To be fair to X who has contributed the first 4 years and Y who helps paying the remainder, how much should X and Y get?" Please help. Thank you.
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May 18th, 2012, 02:14 AM   #2
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Re: How to divide insurance payout fairly

Are you serious?
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May 18th, 2012, 06:07 PM   #3
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Re: How to divide insurance payout fairly

Yup, s/he is serious. I have been trying to get a context and more information, so far that have not been much use.
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May 19th, 2012, 02:46 AM   #4
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Re: How to divide insurance payout fairly

The context? Well, it is just a synopsis of an actual insurance policy. It is similar to say child endowment/scholarship or life policy where you pay a premium for a certain years (till the child reaches university/high school age).You get the payout (that includes your investment, interest plus bonuses which are compounded yearly) on condition that something happens (ie child reaches university age). Usually, you get nothing if you stop the policy in 2 years. Please email me if you need more details so that I can attach the excel spreadsheet of the actual data. Thank you. Please help.
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May 19th, 2012, 10:13 AM   #5
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Re: How to divide insurance payout fairly

Quote:
Originally Posted by thirst4answer
X paid first 4 years of premium (say $200/year=$800) and left all the bonuses and entitlement that he got yearly from year 1 to year 11 there. Y helped X pay same amount for the remainder 7 years (year 5 - 11=$1400). Y also did the same with the bonuses and entitlement. At year 12 the insurance made a payment of say $500,000 that consist of a lump sum $380,000 plus $120,000 bonuses and entitlement. To be fair to X who has contributed the first 4 years and Y who helps paying the remainder, how much should X and Y get?
WHY is Y's contribution not shown?
All that can be done with above info is:
x = 800 + 1400 - y
y = 2200 - x

X gets x / 2200 * 500000 ; Y gets leftover.

Can I get in touch with that Insurance Company?
I'm sure interested in contributing $200 per year for 11 years, then get back $500,000 a year later!
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May 19th, 2012, 03:20 PM   #6
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Re: How to divide insurance payout fairly

Quote:
Y helped x pay same amount for the remainder 7 years (year 5 - 11=$1400)
Y's is shown.

And I was so busy trying to understand the thing I wasn't thinking about the numbers themselves. That is a rather large amount to get from $200 payments for 11 years.

And having two threads running on this is getting extremely confusing.
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May 20th, 2012, 07:32 AM   #7
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Re: How to divide insurance payout fairly

Thank you for your reply. I am actually looking for the logic/method/formula on how should the insurance settlement ($500,000) should be divided between X and Y fairly rather than what the the actual amount to be (as the amount/figure was not real) . The $380,000 was the insured amount payable if and only if an unexpected event (e.g. accident) has happened. It may happen in the first year or it may happen in 50 or 80 years. So should it be separately calculated and applied with different method/formula to the bonuses/dividends or should it be calculated as one amount with the bonuses/dividend (i.e. $380,000+$120,000 =$500,00). If so how?
Your opinion/help would be appreciated. Thank. Sincerely Yours Thirst4answer.
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May 20th, 2012, 09:21 AM   #8
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Re: How to divide insurance payout fairly

If X paid P% of premiums, then X gets P% of settlement; Y gets remainder; OVER AND OUT.
Why can't you accept that?
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May 21st, 2012, 06:45 AM   #9
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Re: How to divide insurance payout fairly

Thank you for your input.
X left all his yearly bonuses (from year1 to year 11 inclusive there till insurance settlement) to accumulate, without this added compounded bonuses feature, division based on percentage of premium contribution would certainly the answer without considering compensation for being the starter (if you stopped/cancelled the insurance policy in first 2 years, you get nothing or almost nothing from the insurance company as they need to pay commissions, admin fees etc)?
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May 21st, 2012, 08:37 AM   #10
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Re: How to divide insurance payout fairly

Every time you "post", you bring in something "new"!

Let's keep it simple and use a simpler similar problem:
X opens a savings account in which he intends to deposit $100 yearly for 5 years.
The interest rate is 12% annually. X makes the deposits for first 2 years.
From year 3 to year 5, X is able to deposit $40 only.
Y comes to his rescue and deposits the difference of $60.
At end of year 5, the account is worth $635.28
If account closed, how much should Y get, keeping in mind the time of his deposits?

This is what the account will look like:
Code:
YR     by X    by Y    INT(12%)    BALANCE
1    100.00     .00        .00     100.00
2    100.00     .00      12.00     212.00
3     40.00   60.00      25.44     337.44
4     40.00   60.00      40.49     477.93
5     40.00   60.00      57.35     635.28
D = Deposit amount (100)
n = number of years (5)
i = interest rate (.12)
F = Future value (?)
Formula:
F = D[(1 + i)^n - 1] / i
F = 100[(1 + .12)^5 - 1] / .12
F = 635.28
So together, they get $635.28

Y's share is the value of D=60 for 3 years:
F(Y) = 60[(1 + .12)^3 - 1] / .12
F(Y) = 202.46
So X's share = 635.28 - 202.46 = 432.82

IF this had been done using a percentage of the deposits, then Y's would be:
180/500 * 635.28 = 228.70

Does that make your day(!), or is there something else you "forgot" to mention?
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