AM3.12345

AM3.12345 - Chapter 3 Life Insurance Life insurance is a contract(policy between a life insurance company(insurer and an individual(policyholder or

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Chapter 3 – Life Insurance Life insurance is a contract (policy) between a life insurance company (insurer) and an individual (policyholder or insured) The policyholder agrees to make a single payment or a series of payments to the insurer (these payments are called gross premiums) In return for these premiums, the insurer agrees to pay a fixed sum (called a death benefit) upon the death of the insured, payable to a designated person (this person is called the beneficiary)
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In this chapter, we will be interested in calculating the actuarial present value of future benefits: NSP = apv of future benefits The NSP will be calculated in such a way as to be necessary and sufficient to provide the stated future benefits to the insured, given the following underlying assumptions:
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1. The death benefit is paid at the end of the year in which death occurs 2. Premiums are immediately invested by the insurer and earn interest at exactly the assumed rate of interest 3. Deaths among policyholders occur exactly according to the adopted mortality table
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Whole Life Insurance (section 3.2) A whole life insurance is issued to ( x ) and it provides a payment of $1 at the end of the year in which ( x ) dies, regardless of when death occurs actuarial symbol: A x = apv of future benefit
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Values of 1000 A x are given in Table 2 Example 3.2.1 Determine the NSP for $100,000 worth of whole life insurance issued to a man age (a) 20 (b) 40. Solution to 3.2.1
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This note was uploaded on 04/14/2010 for the course ACSCI 2053 taught by Professor Kopp during the Spring '09 term at UWO.

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AM3.12345 - Chapter 3 Life Insurance Life insurance is a contract(policy between a life insurance company(insurer and an individual(policyholder or

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