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TB- vary with duration

Y

yogesh167

Member
Hello

Please refer to attachment (from SA2 study material pg5 of ch3), I could not understand the reason in the part (b) of the question that why terminal bonus is likely to vary with duration for format(a)?

Please explain, thanks in advance..
 

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yogesh167 said:
Hello

Please refer to attachment (from SA2 study material pg5 of ch3), I could not understand the reason in the part (b) of the question that why terminal bonus is likely to vary with duration for format(a)?

Please explain, thanks in advance..
Click to expand...

Hi
Total reversionary bonuses (format (b)) might be a reasonable proxy to duration as reversionary bonuses are built up over time. However, format (a) includes % of sum assured and the amount of sum assured doesn't reflect duration of policy, rather it is set at outset.

Does this help?
Thanks
Em
 
Yes Em, I completely agree with what you are saying but sorry to say I am unable to connect it with how does it answer my query of TB varying more by duration in case of % of (SA + RB) instead of total RB only.

Please help me to understand the same.
 
yogesh167 said:
Yes Em, I completely agree with what you are saying but sorry to say I am unable to connect it with how does it answer my query of TB varying more by duration in case of % of (SA + RB) instead of total RB only.

Please help me to understand the same.
Click to expand...
Hi

This is because it includes the sum assured which doesn't vary with duration.
 
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