A person aged as of last birthday has taken a term plan with sum assured of INR 1 lakh with 5 year

to maturity
a) Calculate the expected claim for each year
b) Assuming the claims would be paid at the end of each year; compute present value of claim
c) Calculate the premium payable towards mortality charges if it is a single premium plan
d) If the policy offers return of premium as survival benefit what is the single premium
e) What is the annual premium on the plan
Policty tenure 5

Year Age qx P(Death) P(Survival)E (Claim) Spot rate PV of outfl PV of infl = P(S)/(1+i)^n
0 1 1
1 40 0.00168 0.00168 0.99832 168.00 5.00% 160.00 0.950781
2 41 0.001815 0.001812 0.996508 181.20 5.20% 163.72 0.900429
3 42 0.001969 0.001962 0.994546 196.21 5.30% 168.05 0.85180
4 43 0.002144 0.002132 0.992414 213.23 5.40% 172.78 0.80414
5 44 0.002345 0.002327 0.990086 232.72 5.50% 178.06

PV of expected death benefit 842.62

Survival benefit 3,440.96 5.50% 2,633
Total net premium 3,475 4.507151

Annual premium 1,171.27

denominator 0.72
Annual premium
Exercise: What would premium if survival benefit = 0.5 times of premium
lakh with 5 year to maturity

present value of claim

gle premium plan
single premium

PV of infl = P(S)/(1+i)^n
X
X =E12/(1+G12)^A12
X
X
X
X

times of premium
 A person aged as of last birthday has taken a term plan with sum assured of INR 1 lakh with 5 year to maturity
a) Calculate the expected claim for each year
b) Assuming the claims would be paid at the end of each year; compute present value of claim
c) Calculate the premium payable towards mortality charges if it is a single premium plan
d) If the policy offers surivival beneift of INR 20,000 what it is the expected surivival benefit and its pr

Policty tenure 5

Year Age qx P(Death) P(Survival)E (Claim) Spot rate PV of outfl PV of infl = P(S)/(1+i)^n
0 1 1
1 40 0.00168 0.00168 0.99832 168.00 5.00% 160.00 0.950781
2 41 0.001815 0.001812 0.996508 181.20 5.20% 163.72 0.900429
3 42 0.001969 0.001962 0.994546 196.21 5.30% 168.05 0.85180
4 43 0.002144 0.002132 0.992414 213.23 5.40% 172.78 0.80414
5 44 0.002345 0.002327 0.990086 232.72 5.50% 178.06

PV of expected death benefit 842.62

Survival benefit 19801.73 5.50% 15,151
Total net premium 15,994 4.507151

PV of expected inflows = PV of expected outflow 3,548.49

1 lakh with 5 year to maturity

te present value of claim

ingle premium plan
ected surivival benefit and its present value

PV of infl = P(S)/(1+i)^n
X
X =E12/(1+G12)^A12
X
X
X
X

17,742.47
Perpetual annuity

Investment 100000 100000 100000

Rate of ret 5.50% 5.50% 5.50%
term Perpetual 10 10
growth rat 0% 0% 5%
v 95% 95% 95% =1/(1+E5)
ratio 94.786729857819900% 95% 99.53% =(1+E7)/(1+E5)
Annuity 5500 13266.77687 10263.77 =E4*(1-E9) / ((1-E9^E6)*E9)
₹ 13,266.78

PV of all expected inflows = PV of all expected outflows

100000 = PV of all inflows
1000000 = X/(1+i) + X*(1+g)/(1+i)^2 + X*(1+g)^2/(1+i)^3 …...... X*(1+g)^9/(1+i)^10
1000000 = xv + x*(1+g)*v^2 + x*(1+g)^2*v^3 …...... X*(1+g)^9v^10
1000000 = xv *(1-v^n)/(1-v)
100000*(1-v)/((1-v^n)*v) = X

sum of GP = a * (1 - r^n)/(1 - r)
xv
v*(1+g)

v = 1/(1+i)
A person aged 60 intends to buy a annuity plan for lumpsum investment of Rs.1,00,000
The annuity is payable at the end of each year subject to the person being alive
The term of annuity is 3 years; assume constant interest rate of 6%

Year Age at starqx P(D) P(S) An PV

0 1.00000
1 60 0.00635 0.00635 0.99365 1 0.93741 =(F8*G8)/(1+6%)^B8
2 61 0.00695 0.006906 0.98674 1.05 0.92211 =(F9*G9)/(1+6%)^B9
3 62 0.00761 0.007509 0.97924 1.1025 0.90646 =(F10*G10)/(1+6%)^B10
4 63 0.00835
5 64 0.00916
Total 2.76597
Annuity 36153.64
0)/(1+6%)^B10