Chapter 4: Life Insurance Formula Summary

Continuous Insurance

n-year term life insurance

Ax : n | = E[Z ] = vt t px ( x + t )dt E[ Z 2 ] = v2 t t p x ( x + t ) dt = Ax : n |
1
n n 2 1

0 0

2
Var[Z ]= Ax :n| Ax: n|
1
( ) 1
2

Whole life insurance

( )

A x = E [Z ] = vt t p x ( x + t ) dt
2 2

0
Var[ Z ]= A x A x

If and d are constant,

2
Ax = Ax =
+ + 2

n-year Pure Endowment Insurance

2

Var[ Z ]= A 1 A 1
2

A 1 = E [Z ] = v n n p x = n E x x : n| x : n|
( )
x: n | 2
= v2 n n px vn n px = v 2 n n p x n qx

An n-year Endowment Insurance

A x : n | = A 1x : n | + A 1

( )
x : n| 2 2
Var[ Z ]= Ax :n | Ax :n |
= vt t px ( x + t ) dt + v n n px
n

Annually Increasing Whole Life Insurance

(IA ) x

= E[Z ] = t + 1v t t p x ( x + t )dt
0

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 Chapter 4: Life Insurance Formula Summary

Annually Increasing n-year Term Insurance

(IA ) 1
x :n |
n
= E[Z ] = t + 1v t t p x ( x + t )dt
0

m-thly Increasing Whole Life Insurance

(I ( m)
A ) = E[ Z ] =
tm + 1 v t t p ( x + t )dt
x x
0 m

Continuously Increasing Whole Life Insurance

(IA) x

= E[ Z ] = tv t t px ( x + t ) dt =
0

0 s|
Ax ds

Annually Decreasing n-year Term Insurance

(DA ) 1
x :n | = E [ Z ] = (n t )v t t p x ( x + t )dt
0
n

Relationship: (IA )x:n | + (DA )x:n | = ( n + 1) A

1 1
1
x :n |

Insurances Payable at the End of the Year of Death

n-year Term Life Insurance

n 1 n 1
A1 = E[ Z ] = v k +1
k p x qx + k E [ Z j ] = v j ( k +1) k p x qx + k = jA1
x:n | k =0 k =0 x : n|

Var[ Z ]= 2A1 A1
x: n | x :n|

Whole life insurance

Ax = E[ Z ] = v k +1 k px q x + k Var[ Z ]= 2 Ax ( Ax )
2

k =0

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 Chapter 4: Life Insurance Formula Summary

n-year Pure Endowment Insurance

2
= E [Z ] = v px =n Ex A 1
n
A 1 n Var[ Z ]= A2

x :n|
1
x: n | x :n|

An n-year endowment insurance

Ax :n | = A1 +A 1

Var[Z ]= 2Ax : n| (Ax : n| )

x: n | x : n|
2
n 1
= v k +1
k p x qx + k + v n
n px
k =0

m-year Deferred n-year Term Insurance

m + n 1

m| n Ax = E[ Z ] = v
k=m
k +1
k p x q x+ k

Varying Benefit Discrete Insurance

Annually Increasing Whole Life Insurance

(IA)x = E[ Z ] = (k + 1)v k +1k px qx + k
k =0

Annually Increasing n-year Term Insurance

n 1
(IA )x:n | = E[ Z ] = (k + 1)v k +1 k p x q x+ k
1

k =0

Annually Decreasing n-year term Insurance

n 1
( DA)x:n | = E[ Z ] = ( n k ) v k +1 k p x q x + k
1

k =0

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 Chapter 4: Life Insurance Formula Summary

Recursion:
A1 = vq x + vpx A 1 Ax = vqx + vpx Ax +1 = A1 + vn n px Ax + n
x:n | x +1: n 1 x: n

A 1 = vp x A 1 Ax : n | = vqx + vpx Ax +1: n 1

x: n | x +1: n 1

m|n Ax = vpx ( m 1)| n Ax +1 (IA)x = Ax + vp x (IA)x +1

(IA )x:n | = A
1
1
+ vp x (IA ) 1 (DA )x:n | = nvq x + vp x (DA )
1
1
x:n| x+1:n1 x +1:n 1

Relationships between Continuous and Discrete Insurance Under UDD

Assumption
i i
Ax = Ax A(x m) = Ax = Ax
i ( m)
i ( m)

n| Ax = n| Ax A1 = A1
i x:n i x:n

( IA)x:n 1
= (IA )1x:n Ax:n = A1 + A 1 =
i
A1 + A 1
x:n
i x :n x:n x :n

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