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Life Insurance Premium Calculations

The document outlines calculations for net single premium (NSP) and net annual premium (NAP) for various insurance policies, including term and endowment policies. It includes detailed tables for present value calculations of death claims and premium receipts at different ages and interest rates. Additionally, it provides specific problems with solutions for calculating NSP and NAP based on given data.

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Naimul Haque Didar
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107 views8 pages

Life Insurance Premium Calculations

The document outlines calculations for net single premium (NSP) and net annual premium (NAP) for various insurance policies, including term and endowment policies. It includes detailed tables for present value calculations of death claims and premium receipts at different ages and interest rates. Additionally, it provides specific problems with solutions for calculating NSP and NAP based on given data.

Uploaded by

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

For Term Policy:

Table1: Calculation for Present value of total death claim

Number of insured Number of death PV of Tk 1 Amount claim in Present Value of


Year Age
person person @ 5% per policy death claim

- - - - - - -

- - - - - - -

- - - - - - -

Total Death Claim = ---

PV of total death claim


NSP = Number of total policy holder at begening of the year

Table: 2 Calculation for PV of Tk1 per annum for each living person

Number of insured Premium receipt @ PV of premium receipt


Year Age PV of Tk 1 @ 5%
person tk 1 per annuam @ Tk 1

- - - - - -

- - - - - -

PV of premium receipt @ Tk 1 = ---

PV of death claim
NAP = Total PV of premium receipt @ Tk 1
Endowment Policy:

Table1: Calculation for Present value of total death claim

Number of Number of PV of Tk Amount claim Present Value of


Year Age
insured person death person 1 @ 2% in per policy death

- - - - - - -

- - - - - - -

Total Death Claim = -----

Living person at the end Maturity = Last Year Living Person – Last Year Death Person

PV of total claim of living persons at the end Maturity = Living Person @ Maturity ×Amount per
Policy×@ Maturity PV

PV of total claim = PV of death claim + PV of living claim

PV of total claim (Death + Living )


NSP = Total number of insured person
Table: 2 Calculation for PV of Tk1 per annum for each living person

No. of person
Ag Premium Received @Tk1 PV of Tk1 @ PV of premium
Year
e per annum 14% receive @Tk1
Insured

- - - - - -

Total PV of premium receive@ TK1 ---

PV of total claim (death and living)


NAP = Total PV of Premium receipt @ Tk 1
Problem- 1: Calculate net single premium for 5 years Term Policy of Tk. 5000 from the following
information:

Age Number of insured person Number of death person PV of Tk 1 @ 3%

31 61350 1350 0.971

32 60000 2000 0.943

33 58000 2970 0.915

34 55030 2450 0.888

35 51580 4200 0.863

Solution –1:
Number of Number of PV of Tk 1 @ Amount claim Present Value
Year Age
insured person death person 3% in per policy of death

1 31 61350 1350 0.971 5000 6554250

2 32 60000 2000 0.943 5000 9430000

3 33 58000 2970 0.915 5000 13587750

4 34 55030 2450 0.888 5000 10878000

5 35 51580 4200 0.863 5000 18123000

Total death claim= 58573000

PV of total death claim


We know that, NSP (Net single premium) = Number of total policy holder at begening of the year

58573000
61350
=
= 954.7351263
Problem-2: Calculate net single premium (NSP) for 5 years Endowment policy of Tk 5000 at the age of
36 from the following information:

Age Number of insured person Number of death person PV of Tk 1 @ 3%

36 9480 25 0.971

37 9455 26 0.943

38 9429 28 0.915

39 9401 30 0.888

40 9371 31 0.863

Solution-2:

Number of Number of PV of Tk Amount claim Death


Year Age
insured person death person 1 @ 3% in per person Claim

1 36 9480 25 0.971 5000 121375

2 37 9455 26 0.943 5000 122590

3 38 9429 28 0.915 5000 128100

4 39 9401 30 0.888 5000 133200

5 40 9371 31 0.863 5000 133765

PV OF Total death claim = 639030

Living person at the end of 5th year = 9371 – 31 = 9340

PV of total claim of living persons at the end of 5th year = 9340×5000×.0863 = 40302100

PV of total claim = PV of death claim + PV of living claim = 639030 + 40302100 = 40941130

PV of total claim 40941130


Total number of insured person
= 9480 = 4318.685
We know that, NSP =
Problem – 3: Calculate the net annual premium for 10years Endowment policy of Tk5000 at the age of
41 from the following information:

Number of insured
Age Number of death person PV of Tk 1 @ 5%
person
41 10528 438 0.952
42 10090 463 0.907
43 9627 481 0.864
44 9146 502 0.843
45 8644 539 0.784
46 8105 594 0.747
47 7511 617 0.711
48 6894 690 0.677
49 6204 735 0.645
50 5469 786 0.614

Solution-3:

Table-1 (for calculating the PV of death claim)

Number of Number of Insured sum Total death PV Tk 1 PV death


Year Age
insured person death person per policy claim @ 5% claim

1 41 10528 438 5000 2190000 0.952 2084880

2 42 10090 463 5000 2315000 0.907 2099705

3 43 9627 481 5000 2405000 0.864 2077920

4 44 9146 502 5000 2510000 0.823 2065730

5 45 8644 539 5000 2695000 0.784 2112880

6 46 8105 594 5000 2970000 0.747 2218590

7 47 7511 617 5000 3085000 0.711 2193435

8 48 6894 690 5000 3450000 0.677 2335650

9 49 6204 735 5000 3675000 0.645 2370375

10 50 5469 786 5000 3930000 0.614 2413020

Total Death Claim = 21972185

At the 10th year living person = (5469 - 786) = 4683

Total value of living person’s claim after maturity = 4683×5000=Tk 2341500


Total Present value of living person’s claim after maturity =2341500 × 0.614 = 1437681

Table-2 (For calculating PV of premium received from each living person’s policy)

No of insured Premium receipt @ tk 1 PV of Tk 1 PV of premium


Year Age
person per annuam @ 5% receipt @ Tk 1

1 41 10528 10528 1 10528

2 42 10090 10090 0.952 9605.68

3 43 9627 9627 0.907 8731.689

4 44 9146 9146 0.864 7902.144

5 45 8644 8644 0.823 7114.012

6 46 8105 8105 0.784 6354.32

7 47 7511 7511 0.747 5610.717

8 48 6894 6894 0.711 4901.634

9 49 6204 6204 0.677 4200.108

10 50 5469 5469 0.645 3527.505

Total present value of premium receipt @ Tk 1 = 68475.809

We know that

pv of total claim (death and living) 21972185+14376810


PV receipt @ Tk 1 68475 .809
=
Net Annual Premium = = 530.829727
Problem-4: Calculate the net single premium (NSP) and net annual premium (NAP) for 5
years term policy from the following information’s:

PV of Tk 1 @
Year Age Number of insured person Number of death person
5%

1 31 9480 125 0.952

2 32 9355 126 0.907

3 33 9229 128 0.864

4 34 9101 130 0.823

5 35 8971 136 0.784

Policy value TK. 10,000

Solution-4;

Table-1: For calculating the NSP and NAP for 5 years term policy

Yea Number of Number of PV of Tk Amount claim Present Value of


Age
r insured person death person 1 @ 5% in per policy death claim

1 31 9480 125 0.952 10000 1190000

2 32 9355 126 0.907 10000 1142820

3 33 9229 128 0.864 10000 1105920

4 34 9101 130 0.823 10000 1069900

5 35 8971 136 0.784 10000 1066240

Total Death Claim = 5574880

PV of total death claim


We know that, NSP (Net single premium) = Number of total policy holder at begening of the year

5574880
9480
=
= 588.0675
Table-2: For calculation of PV of premium receivable @1 TK for computing NAP

Number of Premium receipt @ PV of premium


Year Age PV of Tk 1 @ 5%
insured person tk 1 per annuam receipt @ Tk 1

1 31 9480 9480 1 9480

2 32 9355 9355 0.952 8905.96

3 33 9229 9229 0.907 8370.703

4 34 9101 9101 0.864 7863.264

5 35 8971 8971 0.823 7383.133

PV of premium receipt @ Tk 1 = 42003.06

PV of death claim 5574880


=
PV of premium receipt @ Tk 1 42003.06 = 132.7256
We know that, NAP =

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