MTHEL131 Chapter Notes - Chapter 29: Life Table, Life Annuity, Life Insurance
14 Oct 2013
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Policy reserves liabilities that represent the amount expected to be needed to pay future benefits. Measure of the value of obligations to policy owners (regulated by state) Amount that (together with future net premiums and interest) will be sufficient to pay future claims. Has no relationship with insurer"s past experience. Looks at policy"s past premiums and benefits to determine reserves. Reserve = accumulated value of accumulated cost net premiums of insurance. Reserve arises from payment of level net premiums in excess of that need to meet current mortality costs. Premiums in early years are more than sufficient to pay death claims. Create a fund that can be used in later years, when death rates rise. Individual approach retrospective terminal reserve for any individual policy can be obtained too. Cost of insurance the contribution each insured must make as his share of death claims. Reserve = present value of -- present value of expected expected future benefits future net premiums.
