13-1 Life Insurance Premium Computation 1.Mortality CSO Table (separate tables for male/female) 2.Interest - time value of money 3.Loading - for insurer expenses, taxes, profit

13-2 Commissioners 1980 Standard Ordinary Mortality Table Males Females DeathsLifeDeathsLife AgePer 1000ExpectancyPer 1000Expectancy

13-3 One Year Term Policy Alive at age 219,810,509 Number who will die: 10,497 1 year term policy without interest: $10,497,000 9,810,509 = $ year term policy with interest $10,497,780 X ,810,509 = $1.02

13-4 Annual Term for Five Years Age 21 $10,497,780 X =$1.02 9,810,509 Age 22 $10,682,000 X =$1.04 9,800,012 Age 23 $10,866,000 X =$1.06 9,789,330 Age 24 $11,147,000 X =$1.09 9,778,464 Age 25 $11,330,000 X =$1.11 9,767,317

13-5 Net Single Premium: 5 Year Term Policy Amount Present Value YearDeathsof ClaimsDiscountof Claims 110,497 $10,497, $10,044, ,682 10,682, ,781, ,866 10,866, ,521, ,147 11,147, ,347, ,330 11,330, ,091,890 $47,787,890 5 year term net single premium $47,787,890 9,810,509 = $4.8710

13-6 Net Single Premium: 5-Year Annuity Due Present NumberValue Age Alive Claims Discountof Claims 219,810,509 $1 due now $1.000$9,810, ,800,012$ 1 due in 1 year ,378, ,789,330$ 1 due in 2 years ,694, ,778,464$ 1 due in 3 years ,568, ,767,317$ 1 due in 4 years ,190,481 $44,912,264 5-year annuity due premium $44,912,264 9,810,509 =$4.5779

13-7 Net Single Premium: Whole Life Policy Amount Present Value AgeDeathsof ClaimsDiscountof Claims 2110,497 $10,497, $10,044, ,682 10,682, ,781, ,866 10,866, ,521,876 ******* ****** ***** ***** 9930,698 30,698, ,647 $1,052,972,752 Whole Life net single premium $1,052,972,752 9,810,509 = $107.33

13-8 Net Level Premium Conversion $ is the actuarial equivalent of $1 now and a $1 payment every year for 4 years Therefore, $ : $ = $1 : X X = $1.064

13-9 Reserve on Life Insurance Policies Present ValuePresent Value RESERVE =of Future __ of Future BenefitsPremiums

13-10 $1000 $ Net Single Premium Whole life Paid-up at pay life 30-pay life

13-11 Benefit Certain Contracts Benefit Certain Contracts are those under which, if the insured persists in premium payments, the policy will eventually mature and benefits will be payable. 1.Cash value policies, under which benefits are payable whether the insured lives or dies are benefit certain contracts. 2.Ignoring the interest on premiums paid, the net single premium on benefit certain policies equals the face of the policy.

13-12 Benefit Uncertain Contracts Benefit uncertain contracts are those under which, if the insured persists in premium payments for the entire policy period, the insurer may or may not be obligated to make payment.