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Premium Calculation

Premium CalculationLecture: Weeks 12-14 Lecture: Weeks 12-14 (STT 455) Premium CalculationFall 2014 - Valdez1 / 31 PreliminariesPreliminariesAn insurance policy ( life insurance or life annuity) is funded by contractpremiums:once (single Premium ) made usually at time of policy issue, ora series of payments (usually contingent on survival of policyholder)with first payment made at policy issueto cover for the benefits, expenses associated withinitiating/maintaining contract , profit margins, and deviations due toadverse premiums (or sometimes called benefit premiums)

Illustrative example 2 An insurance company issues a 15-year deferred life annuity contract to (50). You are given: Level monthly premiums of Pare paid during the deferred period. The annuity bene t of $25,000 is to be paid at the beginning of each year the insured is alive, starting when he reaches the age of 65.

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