1. 13-1 Life Insurance Premium Computation 1.Mortality - 1980 CSO Table (separate tables for male/female) 2.Interest - time value of money 3.Loading - for insurer expenses, taxes, profit

2. 13-2 Commissioners 1980 Standard Ordinary Mortality Table Males Females DeathsLifeDeathsLife AgePer 1000ExpectancyPer 1000Expectancy 301.7343.241.3547.65 311.7842.311.4046.71 321.8340.461.4545.78 331.9139.541.5044.84 342.0038.611.5843.91

3. 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 = $1.07 1 year term policy with interest $10,497,780 X 0.956994 9,810,509 = $1.02

4. 13-4 Annual Term for Five Years Age 21 $10,497,780 X 0.956994 =$1.02 9,810,509 Age 22 $10,682,000 X 0.95694 =$1.04 9,800,012 Age 23 $10,866,000 X 0.95694 =$1.06 9,789,330 Age 24 $11,147,000 X 0.95694 =$1.09 9,778,464 Age 25 $11,330,000 X 0.95694 =$1.11 9,767,317

5. 13-5 Net Single Premium: 5 Year Term Policy Amount Present Value YearDeathsof ClaimsDiscountof Claims 110,497 $10,497,0000.95694$10,044,999 210,682 10,682,0000.915739,781,828 310,866 10,866,0000.876309,521,876 411,147 11,147,0000.838569,347,428 511,330 11,330,0000.80245 9,091,890 $47,787,890 5 year term net single premium $47,787,890 9,810,509 = $4.8710

6. 13-6 Net Single Premium: 5-Year Annuity Due Present NumberValue Age Alive Claims Discountof Claims 219,810,509 $1 due now $1.000$9,810,509 229,800,012$ 1 due in 1 year 0.956999,378,023 239,789,330$ 1 due in 2 years 0.915738,694,383 249,778,464$ 1 due in 3 years 0.876308,568,868 259,767,317$ 1 due in 4 years 0.838568,190,481 $44,912,264 5-year annuity due premium $44,912,264 9,810,509 =$4.5779

7. 13-7 Net Single Premium: Whole Life Policy Amount Present Value AgeDeathsof ClaimsDiscountof Claims 2110,497 $10,497,0000.95694$10,044,999 2210,682 10,682,0000.915739,781,828 2310,866 10,866,0000.876309,521,876 ******* ****** ***** ***** 9930,698 30,698,0000.03087 947,647 $1,052,972,752 Whole Life net single premium $1,052,972,752 9,810,509 = $107.33

8. 13-8 Net Level Premium Conversion $4.5779 is the actuarial equivalent of $1 now and a $1 payment every year for 4 years Therefore, $4.5779 : $4.8710 = $1 : X X = $1.064

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

10. 13-10 $1000 $ 108 25 35 45 55 65 75 85 95 100 0 Net Single Premium Whole life Paid-up at 65 20-pay life 30-pay life

11. 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.

12. 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.