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in BUS 3024S - Contingencies by (1.6k points)
Hi, when working out the expected maturity benefit for the non-unit fun, we use (ap)x, i.e. the one year probability of the policyholders still in force. Please explain how this accounts for people surviving from the start of the term? i.e. from time 1. In other words, why aren't we using t(ap)x where t is the term of the policy. 

1 Answer

+1 vote
by (240 points)
The expected cost of maturity benefit would depend if there was some sort of guarantee because if not then it wouldn't be on the non-unit cashflows. But going back to your question, the expected cost of the maturity benefit would be included in the row corresponding to the final year and it would be multiplied by (ap)x+t-1 representing the probability of in force policies to year t. This incorporates people who have survived from the start of the term as it refers to lives now aged x+t-1 so they have survived the t-1 years now we want them to survive one more year to then receive the maturity benefit. 
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