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Life Insurance Math_Solution

The document provides a series of calculations for Net Single Premium (NSP) and Net Annual Premium (NAP) for various insurance policies over different terms and age groups. Each problem outlines the number of policyholders, deaths, present value factors, and claims to derive the NSP and NAP. The calculations demonstrate the financial implications of mortality rates and policy values over time.

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mdfarhad2412
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2 views8 pages

Life Insurance Math_Solution

The document provides a series of calculations for Net Single Premium (NSP) and Net Annual Premium (NAP) for various insurance policies over different terms and age groups. Each problem outlines the number of policyholders, deaths, present value factors, and claims to derive the NSP and NAP. The calculations demonstrate the financial implications of mortality rates and policy values over time.

Uploaded by

mdfarhad2412
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Calculation of Net Single Premium (NSP)

Problem 01

Calculate the Net Single Premium (NSP) for 5 years term policy from the following table.
1 2 3 4 5 6 7=4*5*6

Year of Age No of Policyholders No of Amount of PV Factor PV of Claims


Insurance Obtained (Living) Death claim at death @ 5%
1 30 10000 300 20000 0.952 5,714,285.71
2 31 9700 400 20000 0.907 7,256,235.83
3 32 9300 250 20000 0.864 4,319,187.99
4 33 9050 200 20000 0.823 3,290,809.90
5 34 8850 350 20000 0.784 5,484,683.17
Total PV of Claims 26,065,202.60
PV factor= 1/(1+r)^n

Net Single Premium (NSP)= Total PV of Claims/Initial No. of Living Policyholders


= 26,065,202.60/10000
= 2,606.52

Problem 02

Calculate the Net Single Premium (NSP) for 5 years term policy from the following table.
1 2 3 4 5 6 7=4*5*6
Year Age Number of Number of Amount of claim PV Factor PV of Claims
Persons insured Deaths at death @ 3%
1 31 10000 300 5000 0.971 1,456,310.68
2 32 9700 400 5000 0.943 1,885,191.82
3 33 9300 250 5000 0.915 1,143,927.07
4 34 9050 200 5000 0.888 888,487.05
5 35 8850 350 5000 0.863 1,509,565.37
Total PV of Claims 6,883,481.99

Net Single Premium (NSP)= Total PV of Claims/Initial No. of Living Policyholders


= 6,883,481.99/10000
= 688.35
Problem 03:

1 2 3 4 5=3*4 6 7=5*6
Probability of Amount Total Death PV Factor @
Year Age PV of Claims
Death per policy of Claim Claim 3%
1 35 0.00210 20000 42.00 0.971 40.78
2 36 0.00225 20000 45.00 0.943 42.42
3 37 0.00242 20000 48.40 0.915 44.29
4 38 0.00263 20000 52.60 0.888 46.73
5 39 0.00285 20000 57.00 0.863 49.17
Net Single Premium 223.39

Problem 04:

Net Single Premium in Whole Life Policy

1 2 3 4 5 6 7=4*5*6
Year Age Number of Living Number of Deaths PVIF Amount of PV of Death Claims
Persons insured during the year @ 4% Claim per Death
1 91 10000 530 0.962 20000 10,192,307.69
2 92 9470 675 0.925 20000 12,481,508.88
3 93 8795 890 0.889 20000 15,824,135.18
4 94 7905 1428 0.855 20000 24,413,207.70
5 95 6477 1346 0.822 20000 22,126,277.71
6 96 5131 1281 0.790 20000 20,247,858.15
7 97 3850 1157 0.760 20000 17,584,498.20
8 98 2693 1064 0.731 20000 15,549,087.56
9 99 1629 993 0.703 20000 13,953,372.57
10 100 636 636 0.676 20000 8,593,176.23
Total PV of Death Claims 160,965,429.87

NSP= Total PV of claims/ Initial No. of Living


= 160,965,429.87/10000
= 16,096.54
Problem 05:

Net Single Premium in Pure Endowment Policy

Age Number of Living Persons Number of Deaths PVIF @ 5%


insured during the year
35 24,337 1,348 0.952
36 22,989 1,703 0.907
37 21,286 2,178 0.864
38 19,108 2,826 0.823
39 16,282 3,025 0.784

No. of Policyholders Living after 5 Years = 24,337- (1,348+1,703+2,178+2,826+3,025) = 13,257

PV of Claims for Living Policyholders = No. of Living after 5 years* Policy value* PV factor of Last Year
= 13257*10000*.784
= 103,872,063.89
NSP = PV of Claims for Living Policyholder/ Initial No. of Policy Holders

= 103,872,063.89/24337

= 4,268.07
Problem: 6

Net Single Premium in Ordinary Endowment Policy

1 2 3 4 5 6 7=3*5*6
Year Age Number of Deaths Number of PVIF @ Amount of PV of Death
during the year Policyholders 5% Claim per Death Claims
1 45 20 5000 0.952 20,000 380,952.38
2 46 35 4980 0.907 20,000 634,920.63
3 47 48 4945 0.864 20,000 829,284.09
4 48 55 4897 0.823 20,000 904,972.72
5 49 61 4842 0.784 20,000 955,901.92
3,706,031.76

No. of Living Policyholders after 5 Years = 5000- (20+35+48+55+61) = 4781

PV of Claims for Living Policyholders = No. of Living after 5 years* Policy value* PV factor of Last Year
= 4781*20000*0.7835
= 74,920,772.04

NSP for Ordinary Endowment = (PV of Death Claim+ PV of Claim for Living Policyholders)/ Initial No. of
Policyholders

= (3,706,031.76+74,920,772.04)/5000

= 15,725.36
Problem: 7

Year Age Number of Number of PVIF @ 3% Policy value PV of Death


Policyholders Deaths Claims
1 36 9480 25 0.971 5000 121,359.22
2 37 9455 26 0.943 5000 122,537.47
3 38 9429 28 0.915 5000 128,119.83
4 39 9401 30 0.888 5000 133,273.06
5 40 9371 31 0.863 5000 133,704.36
Total PV of Death Claims 638,993.94

No. of Living Policyholders after 5 Years = 9480- (25+26+28+30+31) = 9340

PV of Claims for Living Policyholders = No. of Living after 5 years* Policy value* PV factor of Last Year
= 9,340*5000*0.863
= 40,283,830.23

NSP for Ordinary Endowment = (PV of Death Claim+ PV of Claim for Living Policyholders)/ Initial No. of
Policyholders

= (638,993.94+40,283,830.23)/9480

= 4316.75
Calculation of Net Annual Premium (NAP)

Year Age No. of No of PVIF Premium


PV Factor PV of
Policy Deaths @ Received
Policy PV of Death @ 5% Premium
holders 5% @ Tk. 1
Value Claim Beginning Received @
Per
of Year Tk 1
Annum
1 41 10,528 438 0.952 5,000 2,085,714.29 10,528 1 10,528.00
2 42 10,090 463 0.907 5,000 2,099,773.24 10,090 0.952 9,609.52
3 43 9,627 481 0.864 5,000 2,077,529.42 9,627 0.907 8,731.97
4 44 9,146 502 0.823 5,000 2,064,983.21 9,146 0.864 7,900.66
5 45 8,644 539 0.784 5,000 2,111,603.02 8,644 0.823 7,111.44
6 46 8,105 594 0.746 5,000 2,216,259.73 8,105 0.784 6,350.48
7 47 7,511 617 0.711 5,000 2,192,451.90 7,511 0.746 5,604.82
8 48 6,894 690 0.677 5,000 2,335,095.80 6,894 0.711 4,899.44
9 49 6,204 735 0.645 5,000 2,368,937.77 6,204 0.677 4,199.11
10 50 5,469 500 0.614 5,000 1,534,783.13 5,469 0.645 3,525.37
Total PV of Premium
Total PV of Death Claim 21,087,131.51 68,460.81
Received

Living Policyholders after 5 years= 10528- (438+463+481+502+539+594+617+690+735+500)

= 4969

PV of Claim for Living = 4969*5000*0.614

= 15,252,674.78

NAP = (PV of Death Claim + PV of Claim for Living)/ PV of Premium Received

= (21,087,131.51+15,252,674.78)/ 68,460.81

= 530.81
Calculation of (NSP & NAP)
Problem: 1

Year Age No of Living No of PVIF Policy PV of Death Premium PV Factor PV of


Policyholders Deaths @ value Claims Received @ 5% Premium
5% @ Tk. 1 Per Beginning Received @
Annum of Year Tk. 1
1 31 9480 125 0.952 10000 1,190,476.19 9480 1 9,480.00
2 32 9355 126 0.907 10000 1,142,857.14 9355 0.952 8,909.52
3 33 9229 128 0.864 10000 1,105,712.13 9229 0.907 8,370.98
4 34 9101 130 0.823 10000 1,069,513.22 9101 0.864 7,861.79
5 35 8971 136 0.784 10000 1,065,595.59 8971 0.823 7,380.46
Total PV of Premium 42,002.75
Total PV of Death Claims 5,574,154.26
Received

NSP= Total PV of Death Claim/ Initial No. of Policyholders

= 5,574,154.26/ 9480

= 587.99

NAP= PV of Death Claim/PV of Premium Received

= 5,574,154.26/42,002.75

= 132.71
Problem: 2

Number Number Premium PV Factor


PVIF
of of Deaths Policy PV of Death Received @ @ 2% PV of Premium
Age @
Persons during Value Claim Tk. 1 Per Beginning Received @ Tk 1
2%
insured the year Annum of Year

35 30550 4196 0.980 5000 20,568,627.45 30550 1 30,550.00

36 26335 3285 0.961 5000 15,787,197.23 26335 0.980 25,818.63

37 23069 2562 0.942 5000 12,071,149.11 23069 0.961 22,173.20

38 20507 1978 0.924 5000 9,136,831.26 20507 0.942 19,324.20

39 18529 1164 0.906 5000 5,271,353.31 18529 0.924 17,117.93


Total PV of Premium
Total PV of Death Claim 62,835,158.36 114,983.97
Received

Living Policyholders after 5 years= 30550-(4196+3285+2562+1978+1164)

= 17,365

PV of Claim for Living = 17365*5000*0.906

= 78,640,077.56

NSP for Ordinary Endow= (PV of Death Claim + PV of Claim for Living)/ Initial No. of Persons

= (62,835,158.36 +78,640,077.56)/30550

= 4630.94

NAP = (PV of Death Claim + PV of Claim for Living)/ PV of Premium Received

= (62,835,158.36 +78,640,077.56)/ 114,983.97

= 1230.39

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