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Including benefits at time t for retrospective policy values

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asked Nov 12 in BUS 3024S - Contingencies by anonymous

BUS3024S Test 1 2008.pdf (0,2 MB)

For question 6 (ii) of this paper, they asked us to calculate the retrospective policy value of a special kind of endowment assurance (which has a reversionary bonus). When they calculate it, they do not include the survival benefit at time t. I find this strange since our textbook says that it is convention that benefits at time t should be included but not premiums at time t. Unfortunately I cannot attach the memo since the file is too big. 

1 Answer

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answered Nov 13 by Dean_Bunce (1,120 points)

The retrospective policy value is the expected value of the premiums received less the value of expected benefits paid out (i.e. cover offered) since the survival benefit is only expected to be paid at the end of the policy, after the end of the 30th year, it is not taken into account at this time.