Assignment on

Premium Calculation

Course Title: Insurance $ Risk Management

Course Code: FIN303
Student Name: Md Mokter Hossain
Student ID: 17FB049

Calculation of Net Single Premium in case of term Policy:

Problem-1
Calculate Net Single Premium for 5 years’ term policy from the following information

Year Age Number of person Number of Death

Insured
1 31 51600 150
2 32 51450 200
3 33 51250 250
4 34 51000 300
5 35 50700 350

Other information
i) Rate of return on investment is 3%
ii) The amount of per policy is Tk 1000.

Solution:
Table for calculation of Net Single Premium for the 5 years term policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per death claim Tk 1 death
@3% claim
1 2 3 4 5 6=4x5 7 8=6x7
1 31 51600 150 1000 150000 0.971 145650
2 32 51450 200 1000 200000 0.943 188600
3 33 51250 250 1000 250000 0.915 228750
4 34 51000 300 1000 300000 0.888 266400
5 35 50700 350 1000 350000 0.863 302050
Total=1131450
 Present value of total claim
Net Single Premium=
No . of policy holder at the begining of the year
1131450
= 51600
¿
¿
= 21927 tk
Ans: Net Single Premium Tk 21927

Workings:
S
P=
( 1+i ) n
Here,
P= Present Value
S=Sum for which present value is to be calculated
i=Rate of interest
n= Number of years
S 1 1
For 1st year P= P= = = = 0.971
( 1+i ) n ( 1+ 0.03 ) 1 1.03
S 1 1
For 2nd year P= P= = = = 0.943
( 1+i ) n ( 1+ 0.03 ) 2 1.0609
S 1 1
For 3rd year P= P= = = = 0.915
( 1+i ) n ( 1+ 0.03 ) 3 1.0927
S 1 1
For 4th year P= P= = = = 0.888
( 1+i ) n ( 1+ 0.03 ) 4 1.1255
S 1 1
For 5th year P= P= = = = 0.863
( 1+i ) n ( 1+ 0.03 ) 5 1.1593

Problem-2
Calculate Net Single Premium for 5 years’ term policy from the following information

Year Age Number of person Number of Death

Insured
1 40 91450 165
2 41 91250 200
3 42 91000 305
 4 43 90750 370
5 44 90500 420

Other information
i) Rate of return on investment is 5%
ii) The amount of per policy is Tk 1500.

Solution:
Table for calculation of Net Single Premium for the 5 years term policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per death claim Tk 1 death
@5% claim
1 2 3 4 5 6=4x5 7 8=6x7
1 40 91450 165 1500 247500 0.952 235620
2 41 91250 200 1500 300000 0.907 272100
3 42 91000 305 1500 457500 0.864 395280
4 43 90750 370 1500 555000 0.799 443445
5 44 90500 420 1500 630000 0.783 493290
Total=1839735
Present value of total claim
Net Single Premium=
No . of policy holder at the begining of the year
1839735
= 91450
¿
¿
= 20117 tk
Ans: Net Single Premium Tk 20117

Workings:
S
P=
( 1+i ) n
Here,
P= Present Value
S=Sum for which present value is to be calculated
i=Rate of interest
n= Number of years
S 1 1
For 1st year P= P= = = = 0.952
( 1+i ) n ( 1+ 0.05 ) 1 1.05
S 1 1
For 2nd year P= P= = = = 0.907
( 1+i ) n ( 1+ 0.05 ) 2 1.1025
S 1 1
For 3rd year P= P= = = = 0..864
( 1+i ) n ( 1+ 0.05 ) 3 1.1576
S 1 1
For 4th year P= P= = = = 0.799
( 1+i ) n ( 1+ 0.05 ) 4 1.2502
S 1 1
For 5th year P= P= = = = 0.783
( 1+i ) n ( 1+ 0.05 ) 5 1.2763

Problem-3
Calculate Net Single Premium for 5 years’ term policy of Tk.10000 from the following information

Age Number of person Number of Death Present value of Tk 1

Insured @3%
31 61500 1350 0.971
32 60150 2000 0.943
33 58150 2970 0.915
34 55180 3450 0.888
35 51350 4200 0.863

Other information
i) Insured sum of per policy is Tk 5000.

Solution:

Table for calculation of Net Single Premium for the 5 years term policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per death claim Tk 1 death
@3% claim
 1 2 3 4 5 6=4x5 7 8=6x7
1 31 61500 1350 10000 13500000 0.971 13108500
2 32 60150 2000 10000 20000000 0.943 18860000
3 33 58150 2970 10000 29700000 0.915 27175500
4 34 55180 3450 10000 34500000 0.888 30636000
5 35 51350 4200 10000 42000000 0.863 36246000
Total=126026000

Present value of total claim

Net Single Premium=
No . of policy holder at the begining of the year
126026000
=
61500
= 2049203 tk
Ans: Net Single Premium Tk 2049203

Problem-4
Calculate Net Single Premium for 5 years’ term policy from the following information

Year Age Number of person Number of Death

Insured
1 40 51600 100
2 41 51450 220
3 42 51250 230
4 43 51000 250
5 44 50700 300

Other information
iii) Rate of return on investment is 3%
iv) The amount of per policy is Tk 500.

Solution:
Table for calculation of Net Single Premium for the 5 years term policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per death claim Tk 1 death
@3% claim
1 2 3 4 5 6=4x5 7 8=6x7
1 40 51600 100 500 50000 0.971 48550
2 41 51450 220 500 110000 0.943 103730
3 42 51250 230 500 115000 0.915 105225
4 43 51000 250 500 125000 0.888 111000
5 44 50700 300 500 150000 0.863 129450
Total =497955tk

Present value of total claim

Net Single Premium=
No . of policy holder at the begining of the year
497955
=
51600
= 9650 tk
Ans: Net Single Premium Tk 9650

Workings:
S
P=
( 1+i ) n
Here,
P= Present Value
S=Sum for which present value is to be calculated
i=Rate of interest
n= Number of years
S 1 1
For 1st year P= P= = = = 0.971
( 1+i ) n ( 1+ 0.03 ) 1 1.03
S 1 1
For 2nd year P= P= = = = 0.943
( 1+i ) n ( 1+ 0.03 ) 2 1.0609
S 1 1
For 3rd year P= P= = = = 0.915
( 1+i ) n ( 1+ 0.03 ) 3 1.0927
 S 1 1
For 4th year P= P= = = = 0.888
( 1+i ) n ( 1+ 0.03 ) 4 1.1255
S 1 1
For 5th year P= P= = = = 0.863
( 1+i ) n ( 1+ 0.03 ) 5 1.1593

Calculation of Net Single Premium in case of general Endowment Policy:

Problem-1
Calculate Net Single Premium for 5 years’ endowment policy of Tk 20000 from the following
information

Age Number of person Number of Death Present value of Tk 1

Insured @5%
51 43470 3328 0.952
52 40142 3950 0.907
53 36192 4643 0.864
54 31549 5231 0.823
55 26218 5944 0.784

Solution:
Table for calculation of Net Single Premium for the 5 years Endowment policy
 Year Age Number Number Amount Total Present Present
of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @5% claim
1 2 3 4 6=4x5 7 8=6x7
5
1 51 43470 3328 20000 66560000 0.952 63365120
2 52 40142 3950 20000 79000000 0.907 71653000
3 53 36192 4643 20000 92860000 0.864 80231040
4 54 31549 5231 20000 104620000 0.823 86102260
5 55 26318 5944 20000 118880000 0.784 93201920
Total PV of death claim =394553340 tk

No. of living person’s after maturity/ 5 years later= (26318-5944)

=20374
Total value of living person’s claim =20374 X 20000X 0.784
=319464320 Tk

Present value of total claim (Death+alive)

Net Single Premium=
No . of policy holder at the begining of the year
394553340+ 319464320
= 43470 ¿
¿
714017660
= 43470
¿
¿
=16425.53 tk
Ans, Net Single Premium Tk 16425.53
Problem-2
Calculate Net Single Premium for 5 years’ endowment policy of Tk 1000 from the following
information

Age Number of person Number of Death Present value of Tk 1

Insured @5%
51 43470 3300 0.952
52 40000 3850 0.907
53 36150 4643 0.864
54 31500 5260 0.823
55 26200 5900 0.784

Solution:
Table for calculation of Net Single Premium for the 5 years Endowment policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @5% claim
1 2 3 4 6=4x5 7 8=6x7
5
1 51 43470 3300 1000 3300000 0.952 3141600
2 52 40000 3850 1000 3850000 0.907 3491950
3 53 36150 4643 1000 4643000 0.864 4011552
4 54 31500 5260 1000 5260000 0.823 4328980
5 55 26200 5900 1000 5900000 0.784 4625600
Total PV of death claim =19599682tk

No. of living person’s after maturity/ 5 years later= (26200-5900)

=20300
Total value of living person’s claim =20300 X 1000X 0.784
=15915200Tk

Present value of total claim (Death+alive)

Net Single Premium=
No . of policy holder at the begining of the year
 19599682+15915200
=
43470
35514882
= 43470
¿
¿
=816.99 tk
Ans: Net Single Premium Tk 816.99

Problem-3
Calculate Net Single Premium for 5 years’ endowment policy of Tk 500 from the following
information

Age Number of person Number of Death Present value of Tk 1

Insured @3%
41 43450 3328 0.971
42 40000 3950 0.943
43 36500 4643 0.915
44 31670 5231 0.888
45 26210 5944 0.863

Solution:
Table for calculation of Net Single Premium for the 5 years Endowment policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @3% claim
1 2 3 4 6=4x5 7 8=6x7
5
1 41 43450 3328 500 1664000 0.971 1615744
2 42 40000 3950 500 1975000 0.943 1862425
3 43 36500 4643 500 2321500 0.915 2124172.5
4 44 31670 5231 500 2615500 0.888 2322564
5 45 26210 5944 500 2972000 0.863 2564836
Total PV of death claim =10489741.5
tk

No. of living person’s after maturity/ 5 years later= (26210-5944)

=20266
Total value of living person’s claim =20266 X 500X 0.863
=8744779 Tk
 Present value of total claim (Death+alive)
Net Single Premium=
No . of policy holder at the begining of the year
10489741.5+ 8744779
=
43450
19234520.5
= 43450 ¿
¿
=442.68 tk
Ans, Net Single Premium Tk 442.68

Problem-4
Calculate Net Single Premium for 5 years’ Endowment policy from the following information

Year Age Number of person Number of Death

Insured
1 40 51600 100
2 41 51450 220
3 42 51250 230
4 43 51000 250
5 44 50700 300

Other information
i) Rate of return on investment is 3%
ii) The amount of per policy is Tk 500.

Solution:
Table for calculation of Net Single Premium for the 5 years Endowment policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per death claim Tk 1 death
@3% claim
1 2 3 4 5 6=4x5 7 8=6x7
1 40 51600 100 500 50000 0.971 48550
2 41 51450 220 500 110000 0.943 103730
3 42 51250 230 500 115000 0.915 105225
4 43 51000 250 500 125000 0.888 111000
5 44 50700 300 500 150000 0.863 129450
Total PV of death claim =497955 tk
No. of living person’s after maturity/ 5 years later= (50700-300)
=50400
Total value of living person’s claim =50400 X 500X 0.863
=21747600 Tk

Present value of total claim (Death+alive)

Net Single Premium=
No . of policy holder at the begining of the year
497955+21747600
=
51600
22245555
=
51600
=431.12 tk
Ans, Net Single Premium Tk 431.12

Workings:
S
P=
( 1+i ) n
Here,
P= Present Value
S=Sum for which present value is to be calculated
i=Rate of interest
n= Number of years
S 1 1
For 1st year P= P= = = = 0.971
( 1+i ) n ( 1+ 0.03 ) 1 1.03
S 1 1
For 2nd year P= P= = = = 0.943
( 1+i ) n ( 1+ 0.03 ) 2 1.0609
S 1 1
For 3rd year P= P= = = = 0.915
( 1+i ) n ( 1+ 0.03 ) 3 1.0927
S 1 1
For 4th year P= P= = = = 0.888
( 1+i ) n ( 1+ 0.03 ) 4 1.1255
S 1 1
For 5th year P= P= = = = 0.863
( 1+i ) n ( 1+ 0.03 ) 5 1.1593
Calculation of Net Single Premium in case of Whole Life Policy:
Problem-1
Calculate Net Single Premium for whole life policy of Tk 10000 from the following information

Age Number of person Number of Death Present value of Tk 1

Insured @5%

91 10000 830 0.952

92 9170 975 0.907
93 8195 290 0.864
94 7905 1428 0.823
95 6477 1346 0.784
96 5131 1281 0.747
97 3850 1157 0.711
98 2693 1064 0.677
99 1629 993 0.645
100 636 636 0.614

Solution:
Table for calculation of Net Single Premium for whole life policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @5% claim
1 2 3 4 6=4x5 7 8=6x7
5
1 91 10000 830 10000 8300000 0.952 7901600
2 92 9170 975 10000 9750000 0.907 8843250
3 93 8195 290 10000 2900000 0.864 2505600
4 94 7905 1428 10000 14280000 0.823 11752440
5 95 6477 1346 10000 13460000 0.784 10552640
 6 96 5131 1281 10000 12810000 0.747 9569070
7 97 3850 1157 10000 11570000 0.711 8226270
8 98 2693 1064 10000 10640000 0.677 7203280
9 99 1629 993 10000 9930000 0.645 6404850
10 100 636 636 10000 6360000 0.614 3905040
Total PV of death claim =76864040tk

Present value of total claim

Net Single Premium for whole life policy =
No . of policy holder at the begining of the year
76864040
=
10000
= 7686.40tk
Ans: Net Single Premium Tk 7686.40
Problem-2
Calculate Net Single Premium for whole life policy of Tk 5000 from the following information

Age Number of person Number of Death Present value of Tk 1

Insured @5%

91 10000 800 0.952

92 9170 975 0.907
93 8195 290 0.864
94 7905 1428 0.823
95 6477 1300 0.784
96 5131 1281 0.747
97 3850 1150 0.711
98 2693 1064 0.677
99 1629 998 0.645
100 636 640 0.614

Solution
Table for calculation of Net Single Premium for whole life policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @5% claim
1 2 3 4 6=4x5 7 8=6x7
5
1 91 10000 800 5000 4000000 0.952 3808000
2 92 9170 975 5000 4875000 0.907 4421625
3 93 8195 290 5000 1450000 0.864 1252800
 4 94 7905 1428 5000 7140000 0.823 5876220
5 95 6477 1300 5000 6500000 0.784 5096000
6 96 5131 1281 5000 6405000 0.747 4784535
7 97 3850 1150 5000 5750000 0.711 4088250
8 98 2693 1064 5000 5320000 0.677 3601640
9 99 1629 998 5000 4990000 0.645 3218550
10 100 636 640 5000 3200000 0.614 1964800
Total PV of death claim =38112420tk

Present value of total claim

Net Single Premium for whole life policy =
No . of policy holder at the begining of the year
38112420
=
10000
= 3811.24tk
Ans: Net Single Premium Tk 3811.24

Problem-3
Calculate Net Single Premium for whole life policy of Tk 1000 from the following information

Age Number of person Number of Death Present value of Tk 1

Insured @3%

91 10000 800 0.971

92 9180 975 0.943
93 8190 290 0.915
94 7908 1428 0.888
95 6500 1300 0.863
96 5140 1281 0.837
97 3800 1150 0.813
98 2690 1064 0.789
99 1640 998 0.766
100 660 640 0.744

Solution
Table for calculation of Net Single Premium for whole life policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @3% claim
1 2 3 4 6=4x5 7 8=6x7
5
1 91 10000 800 1000 800000 0.971 776800
 2 92 9180 975 1000 975000 0.943 919425
3 93 8190 290 1000 290000 0.915 265350
4 94 7908 1428 1000 1428000 0.888 1268064
5 95 6500 1300 1000 1300000 0.863 1121900
6 96 5140 1281 1000 1281000 0.837 1072197
7 97 3800 1150 1000 1150000 0.813 934950
8 98 2690 1064 1000 1064000 0.789 839496
9 99 1640 998 1000 998000 0.766 764468
10 100 660 640 1000 640000 0.744 476160
Total PV of death claim =8438810tk

Present value of total claim

Net Single Premium for whole life policy =
No . of policy holder at the begining of the year
8438810
=
10000
= 843.88tk
Ans: Net Single Premium Tk 843.88
Problem-4
Calculate Net Single Premium for whole life policy of Tk 10000 from the following information

Age Number of person Number of Death Present value of Tk 1

Insured @3%

91 10000 800 0.971

92 9100 975 0.943
93 8100 290 0.915
94 7900 1428 0.888
95 6500 1300 0.863
96 5100 1281 0.837
97 3800 1150 0.813
98 2600 1064 0.789
99 1600 998 0.766
100 600 640 0.744

Solution
Table for calculation of Net Single Premium for whole life policy

Year Age Number Number Amount Total Present Present

of person of Death of claim death value of value of
Insured per claim Tk 1 death
death @3% claim
1 2 3 4 6=4x5 7 8=6x7
 5
1 91 10000 800 10000 8000000 0.971 7768000
2 92 9100 975 10000 9750000 0.943 9194250
3 93 8100 290 10000 2900000 0.915 2653500
4 94 7900 1428 10000 14280000 0.888 12680640
5 95 6500 1300 10000 13000000 0.863 11219000
6 96 5100 1281 10000 12810000 0.837 10721970
7 97 3800 1150 10000 11500000 0.813 9349500
8 98 2600 1064 10000 10640000 0.789 8394960
9 99 1600 998 10000 9980000 0.766 6586800
10 100 600 640 10000 6400000 0.744 4761600
Total PV of death claim = 83330220tk

Present value of total claim

Net Single Premium for whole life policy =
No . of policy holder at the begining of the year
83330220
=
10000
= 8333.02tk
Ans: Net Single Premium Tk 8333.02