Life Insurance Policies
Universal Life Insurance
This is a type of policy that was introduced in 1979 and has gained tremendous popularity over the years. In essence, it is a very flexible type of policy that allows the insured to pay in excess of the pure premium each year. The excess fund can them be used to invest in money market in instruments or other investments that the policy holder chooses. This means that the insurance company does not guarantee a fixed rate of return on the funds. Rather, the policyholders, bear interest rate risk and default risk on the investments,
This type of policy is so flexible that the policyholder may choose not to pay a premium on any given year. In that case, the insurance company simply takes the premium payment from the policyholder's investment funds. Not only is the premium payment flexible with universal life policies, but the amount of death benefits can also be changed at the policyholder's option. In addition, the policyholder can withdraw money from the accumulated investment funds.
Annuities
An annuity is a finite series of equal payments that occur at periodic intervals. Insurance companies also offer annuities, and there are several variations on to the annuity theme. The most important are fixed period annuities and life annuities.
Fixed period Annuities
In fixed, period annuities, the equal payments occur over a fixed period of time, usually ten years. With this annuity, the insurance company continues to pay benefits to the annuitant's heirs in case death occurs prior to the annuity's expiration. Because of this, there is no risk of losing benefits because of early death.
The fair premium under the fixed period annuity can be calculate by using following equation
Universal Life Insurance
This is a type of policy that was introduced in 1979 and has gained tremendous popularity over the years. In essence, it is a very flexible type of policy that allows the insured to pay in excess of the pure premium each year. The excess fund can them be used to invest in money market in instruments or other investments that the policy holder chooses. This means that the insurance company does not guarantee a fixed rate of return on the funds. Rather, the policyholders, bear interest rate risk and default risk on the investments,
This type of policy is so flexible that the policyholder may choose not to pay a premium on any given year. In that case, the insurance company simply takes the premium payment from the policyholder's investment funds. Not only is the premium payment flexible with universal life policies, but the amount of death benefits can also be changed at the policyholder's option. In addition, the policyholder can withdraw money from the accumulated investment funds.
Annuities
An annuity is a finite series of equal payments that occur at periodic intervals. Insurance companies also offer annuities, and there are several variations on to the annuity theme. The most important are fixed period annuities and life annuities.
Fixed period Annuities
In fixed, period annuities, the equal payments occur over a fixed period of time, usually ten years. With this annuity, the insurance company continues to pay benefits to the annuitant's heirs in case death occurs prior to the annuity's expiration. Because of this, there is no risk of losing benefits because of early death.
The fair premium under the fixed period annuity can be calculate by using following equation
R = C X PVIFA r,n
PVIFA r,M X (1+r)t
Where,
R = The fair permium
C = Amount of annuity payment
n = Number of annuity payment
T = Starting years
M = Number of payments in year
r = Annual cost of money
Life Annuities
This type of annuity paid equal periodic amounts until the annuitants dies. Sine life annuities pay benefits until the annuitant dies, they contain an element of randomness, so their pricing relies on actuarial methods based on mortality tables. !!!!!
Life Annuities
This type of annuity paid equal periodic amounts until the annuitants dies. Sine life annuities pay benefits until the annuitant dies, they contain an element of randomness, so their pricing relies on actuarial methods based on mortality tables. !!!!!
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