Along with my other questions I listed on these forums, here's another. Section 5 --- Asset Shares
Comparing Pg 9, 10 year endowment assurance policy graph to the 10 year term insurance graph in solution 5.4 on page 16. I would think the Endowment policy would follow the steep fall like the term insurance example due to the cost of death claims and then rises again due to premiums. Also, at the end of 10 years shouldn't the endowment graph dip as well due to the maturity value the PH would receive? I would think it would follow the same logic as the term assurance solution as well where it states -- At later dates as the policyholder ages, the cost of cover rises above the level of the premiums and the AS decreases.
My two main questions is 1) that I would not think the Endowment assurance would follow the Step type graph on page 9 but would follow the term assurance idea that when death does occur there is a steep drop at that time(Triangle falling steeply down like on pg 16 and not a step format as shown on page 9) and 2) I would think the graph dips at the end like the term assurance graph not rise continously.
It could just be terminology difference as well. I'm in the US and when Endowment assurance is mentioned, it means a DB up until some point if death occurs but if you live until maturity you get the maturity amount. I've noticed at times when speaking of endowment in then notes it doesn't include the DB up to some point but only the maturity amount is given if living. In north american terminology this is called a PURE ENDOWMENT. If the example is actually referring to a Pure endowment then the STEP format would make sense to me.
Thanks,
Last edited by a moderator: Aug 24, 2014
