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m -thly period,
Ax
Ax
on average it is paid
1+ m m1
=
yearsearlier .
2m
2m
Example 1
x+ K x +
x+ K x
x
50
Suppose
x+ K x +
60
1
4
60.25
x+ K x +
2
4
5
8
x+ K x +
3
4
x+ K x +1
60.5
60.75
60.625
x+ K x
and
61
x+ K x +1 .
Ax
Kx +
1
,
4
Kx+
2
,
4
Kx +
3
4
or
K x +1 .
If the death occur evenly over the year, then, on average the
benefit is paid at time 5/8 as computed below
1 2 3 4
+ + +
4 4 4 4 1+ 4 5
=
= =0.625
4
2(4 ) 8
which is 3/8 years earlier than the death benefit at the end of
year
1
1+ 4 41 3
=
=
2 (4 ) 2 (4 ) 8
m+1
2m
+ 1q x v
k q x v
k+
1+
m +1
2m
+ 2q x v
2+
m +1
2m
m +1
2m
k=0
m1
(1+i ) 2 m
k q x v k +1
k=0
That is,
m1
A (xm ) (1+i) 2m A x
1
A x (1+i) 2 A x
If the benefit is paid immediately on death and lives die uniformly
through the year, then, on average the benefit is paid half-way through
the year of death, which is half a year earlier than the benefit valued
by
Ax .
Example 2
Let
m=2
and
death.
(2 )
For
Ax ,t
For
Ax,t
will be 1.
(2 )
Ax
occurs
0.5+ 1
=0.75 .
2
10.75=0.25
(1+i)
. Alternatively, as we let
(2 )
x
A (1+ i)
Ax
Example 3
Let
Ax
Let
(m )
Ax
0.25 earlier).
A (xm )=10(1+i)4.75=10(1+i)0.25 (1+i)5=(1+i)0.25 A x
For UDD approach, these approximations apply ONLY to death benefits.
Hence, the claims of acceleration approach give the formula for an
endowment insurance as,
Problem
Find the value below by using the claims of acceleration
approach and referring to the Illustrative Life Table with interest
at 6%.
condition
This individual will be treated as being older in order to
2) Constant Addition to x
Imposed to individuals who actively participate in hazardous
pursuits
The extra risk is independent of age
We could model this extra risk by adding a constant to the force
of mortality
Functions
o with superscript i denote the impaired life
o without this i denote a standard survival model
o
= constant added to the force of mortality
Formula to compute the EPV of a survival benefit is
Therefore,
With
j=e
is used to compute
K [ x] ,
q [ x ] +t=1.1 q [ x ] +t , where