The solution to the second practice question here mentions that: "Later in the policy term the reserve would almost certainly exceed the death benefit and hence, there would be no mortality risk (in fact, there would be a slight longevity risk)" I understand why mortality risk would disappear as the reserves build up, but not sure why there's a longevity risk here? Does the question refer to a circumstance where the maturity benefit for the endowment contract is higher than the death benefit?
Hi Kanishka Yes, that's right. We are looking at a situation here where the death benefit (return of premiums) is less than the maturity benefit (which will have allowed for investment returns). Best wishes Mark
