DOCTOR’S BILL

BENEFIT
MONEY
PROTECTION

ACTUARIAL MATHEMATICS I
Chapter 1: Introduction to Life Insurance

HEALTH MEDICAL

PATIENT
PREVENTION
INSURANCE TERMS
Insurer – Insurance company
Insured – A person/company covered by insurance
Policy – The legal document (terms & conditions) between the
insured & the insurer
Premium – Payments to be paid for insurance contract
Sum assured – An amount that the beneficiary will receive in
case of insured death
Risk – The chance that a loss might occur
Peril – The cause of a loss
Hazard – The increase of a risk(s)
TRADITIONAL INSURANCE CONTRACTS
1. Whole life insurance
• Pays a lump sum benefit on the death of the policyholder
whenever it occurs.
• The insured person is covered for the duration of their life as
long as premium are paid.
• The premium is payable only up to certain age of the insured.
death $

P P P P P …….. ……. P
x
or Premium end
Death $
P P P P P …….. ……. P
x
t=0 1 2 3 4 n
TRADITIONAL INSURANCE CONTRACTS
2. Term insurance
• Pays a lump sum benefit on the death of the policyholder
provided death occurs before the end of the specified time.
• Types of term insurance:
• Level term insurance
• Decreasing term insurance
• Renewable term insurance – no need to provide evidence of health
status.
• Convertible term insurance – convert to WL or Endowment insurance
without evidence of health status.
policy end
P P P P P …….. P …….
x x
t=0 1 2 3 4 n
Death $ Death $
TRADITIONAL INSURANCE CONTRACTS
3. Endowment insurance
• Pays a lump sum benefit either on the death of the insured or at
the end of the term, which ever occurs first
• Term insurance benefit + savings element

P P P P P …….. P …….
x
t=0 1 2 3 4 n
Death $
or
$

P P P P P …….. ……. P
x
t=0 1 2 3 4 n
Death
WITH OR WITHOUT PROFIT INSURANCE
• With-profit Insurance
• participating insurance
• Invest the premium - profit - shared with policyholders
• Cash dividends/reduced premiums
• To increase the sum assured called as reversionary bonuses (received during
the term of contract) and terminal bonuses (received when the policy
matures – death or endowment policy reaches the end of the term)

• Without-profit Insurance
• non-participating insurance

AiA Investment
MODERN INSURANCE CONTRACTS
Combination of death benefit coverage & investment element
Types of modern insurance:
1. Universal life insurance
• Investment + life insurance
• Premium split into two part:
• Cover life insurance
• Saving and investment
• Policyholder can choose how much premium pay within a certain range

2. Unitized with-profit
• Premiums are used to buy number of investment units at the current price (called with-
profit).
• Unit prices increase in line with bonuses declares and do not fall
• On death or maturity, further terminal bonus may be payable depending on the
performance of the with-profit fund
MODERN INSURANCE CONTRACTS
Types of modern insurance:
3. Equity-linked insurance (ELI)
• Has benefit linked to the performance of an investment fund
• Some or all of the premium is allocated to separate account,
which is invested in open-ended investment company (eg.:
common stock).
• If the investment portfolio does well, the death benefit increases
accordingly and if it perform poorly, the death benefit decreases.
• However, all ELI policies have a benefit floor (guaranteed
minimum death benefit).
OTHER INSURANCE POLICY
1. Income protection insurance - This type of insurance is designed to pay a
benefit if you are unable to work for a period of time because of illness or injury.
It replace at least some income during periods of sickness. The benefit cease at
retirement age.

2. Critical illness insurance - benefit plan that pays you a benefit if

3. Long-term care insurance – to cover the costs of care in old age. It provides
benefit to pay for such expenses eg. as nursing home care and assisted living
services if you're no longer able to live independently on your own. This benefit is
an annuity benefit.
LIFE ANNUITIES
1. Annuity contracts offer a regular series of payments.
2. Whole life annuity: the annuity continues until the death of the
annuitant.
3. Term life annuity: the annuity is paid for some certain period,
provided the annuitant survives that period.
4. Types of annuity
i. Single Premium Deferred Annuity (SPDA)
ii. Single Premium Immediate Annuity (SPIA)
iii. Regular Premium Deferred Annuity (RPDA)
iv. Joint life annuity
v. Last survivor annuity
vi. Reversionary annuity
Thank you