CM1 Practice Question 19.7i

[Cam Bridger]

Bit confused that this is called an endowment assurance when there are only death benefits? I spent some time trying to put some survival benefits together, but it looks like there are none in the solution.

However when looking at the solution, perhaps they are this 4200*D60/D[40]? As I have no idea where that's come from. The simple bonuses in the question are referring to the death benefit and there's no mention of the value of the raw value these bonuses being the survival benefit.

I can only think the survival benefit is (200 + 200*20) * v^n * npx = 4200 * v^20 * 20p[40] = 4200 * D60/D[40]? But I feel like there's no explicit mention of maturity benefits in the question. Which part of the question am I meant to infer as the survival benefit?

Thanks!

 

[Richie Holway]

Hi Cam,

The wording 'endowment assurance' tells us that there is both a death benefit and survival benefit. Death is mentioned in the 2nd sentence of the question only to clarify that the death benefits are payable at the end of the year of death (as opposed to immediately on death), but there is no need for any clarification to be given to the survival benefit, as the only possible time that can be paid is at the end of the term of the policy.

Also, in part (i), we are given information on the bonuses that apply to the sum assured. There is nothing to suggest that this applies to the death benefit only, and so it does apply to both the death and survival benefits.

As you say, the 4200*D60/D[40] in the solution relates to the death benefit, but so does the 9800*A[40]:20 (that A[40]:20 function doesn't have a 1 above the age or term, and so is an endowment assurance function that values the benefit on both death and survival). So the total death benefit being allowed for is 9,800+4,200 = 14,000.

Thanks,
Richie