2023/4/16 12:34 Report - Review Assignment - Practice

CA
L3.2.7 10M
Summary
Sections L3 L3.2 L3.2.7 Summary

Whole Life Insurance

Z denotes the present value random variable of a whole life insurance of $1
payable at the end of year of death:

Z = vKx+1 , Kx ≥ 0
The Expected Present Value (EPV) is:

∞
E[Z] = Ax = vk+1 ⋅ k qx
k=0
|
∑

The second moment of the present value random variable is:

∞
E [ Z2 ] = 2Ax = v2(k+1) ⋅ k qx
k=0
|
∑

The variance of the present value random variable is:

Var[Z] = 2Ax − (Ax)2

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2023/4/16 12:34 Report - Review Assignment - Practice

Relationships

Ax = vqx + vpxAx+1
2Ax = v2 ⋅ qx + v2 ⋅ px ⋅ 2Ax+1
Varying Benefit

Z denotes the present value random variable of an annually increasing whole

life insurance payable at the end of year of death:

Z = (Kx + 1)vKx+1 , Kx ≥ 0
∞
∑ (k + 1)vk+1 ⋅ k qx
E[Z] = (IA)x = k=0 |

Term Life Insurance

Z denotes the present value random variable of an n-year term life insurance of $1
payable at the end of year of death within n years, and nothing otherwise:

vKx+1 , Kx < n
Z = 0 , Kx ≥ n
{

The Expected Present Value (EPV) is:

n−1
E[Z] = A1x: n = vk+1 ⋅ k qx
k=0
|
∑

The second moment of the present value random variable is:

n−1
E[Z 2] = 2A1x: n = v2(k+1) ⋅ k qx
k=0
|
∑

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2023/4/16 12:34 Report - Review Assignment - Practice

The variance of the present value random variable is:

2
Var[Z] = 2A1x: n − (
Ax: n
1
)

A1x: n = vqx + vpx ⋅ A1x+1: n−1

Relationship

Varying Benefit: Increasing/Decreasing

(IA)1x: n + (DA)1x: n = (n + 1)A1x: n

Deferred Whole Life Insurance

Z denotes the present value random variable of an n-year deferred whole life
insurance of $1 payable at the end of year of death after the deferred period, and
nothing otherwise:

Z = 0vKx+1 ,, KKxx <≥ nn

{

The Expected Present Value (EPV) is:

∞
E[Z] = n Ax = vk+1 ⋅ k qx
k=n
| |
∑

The second moment of the present value random variable is:

∞
E[Z 2] = 2n Ax = v2(k+1) ⋅ k qx
k=n
| |
∑

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2023/4/16 12:34 Report - Review Assignment - Practice

The variance of the present value random variable is:

Var[Z] = 2n Ax − n Ax
| ( | )
2

Relationships

Ax = A1x: n + n Ax |

2Ax = 2A1x: n + 2n Ax |

Deferred Term Life Insurance

Z denotes the present value random variable of an n-year deferred m-year term life
insurance of $1 payable at the end of year of death within m years after the
deferred period, and nothing otherwise:

0K +1 , Kx < n
Z = v x ,n ≤ Kx < n + m
⎧
⎪

0 , Kx ≥ n + m
⎨
⎪
⎩

The Expected Present Value (EPV) is:

n+m−1
E[Z] = n mAx = n A1x: m = vk+1 ⋅ k qx
k=n
| | |
∑

The second moment of the present value random variable is:

n+m−1
E[Z 2] = 2n mAx = v2(k+1) ⋅ k qx
k=n
|
|
∑

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2023/4/16 12:34 Report - Review Assignment - Practice

The variance of the present value random variable is:

Var[Z] = 2n mAx − n mAx

| ( | )
2

Relationship

n mAx
| = A1x+n: m ⋅ nEx

Endowment Insurance
Z denotes the present value random variable of an n-year endowment insurance of
$1 payable at the end of the year of death within n years, and upon surviving n
years:

Z = vvKn x+1 ,, KKxx <≥ nn

{

The Expected Present Value (EPV) is:

E[Z] = Ax: n = A1x: n + nEx

The second moment of the present value random variable is:

E[Z 2] = 2Ax: n = 2A1x: n + 2nEx

The variance of the present value random variable is:

Var[Z] = 2Ax: n − (Ax: n )2

For a 1-year endowment insurance of $1:

Ax: 1 = vqx + vpx = v

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