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policyholders.
Term assurance contract- insurance company will make a payment to the policy holders estate if the
policy holder dies during the term of the policy.
The benefits payable under simple life insurance policy are of two types:
1. Benefit payable on or following the death of the policyholder.
2. Benefit may be payable provided the life survives for a given time.
In this subject we will usually assume that money can be invested or borrowed at
some given rate of interest. We will always assume that the rate of interest is
known, that is, deterministic. The mathematics of finance includes several useful
stochastic models of the behaviour of interest rates, but we will not use them. We
will not always assume that the rate of interest is constant, however. When the rate
of interest is constant, we denote the effective compound rate of
interest per annum by i and define
further comment.
-1
Concepts:
Expected present value of a payment contingent on an uncertain future event.
Simple life insurance are of two types:
1. Assurances
2. Annuities
4 varieties of life annuity contract: they are
1. Whole life level annuity or immediate annuity
2. Temporary annuity
3. Deffered annuity- start of the payment is deffered for a period of time
4. Guaranteed annuity
// An immediate annuity is one under which the first payment is made within the first year
itself. The other type of annuity is deferred annuity.//
The mortality of the recently joined policyholders is called select mortality and we
expect it to be better than that of longer duration policyholders, whose mortality we
shall call ultimate mortality.