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A life insurance company wants to update its actuarial tables. Assume that the probability distribution of the?

Term Life Insurance & Whole Life Insurance Discussion

A life insurance company wants to update its actuarial tables. Assume that the probability distribution of the?

Postby wolfcot » Sun Jul 21, 2013 4:50 am

A life insurance company wants to update its actuarial tables. Assume that the probability distribution of the lifetimes of the participants is approximately a normal distribution with a mean of 71 years and a standard deviation of 3.5 years. What proportion of the plan participants are expected to see their 75th birthday?
wolfcot
 
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A life insurance company wants to update its actuarial tables. Assume that the probability distribution of the?

Postby wickley » Sun Jul 21, 2013 4:51 am

I think it all depends to what type of insurance they applied to whether whole life insurance or term life insurance.

Term life insurance works by the assumption that the older you get, the less life insurance you need. A middle aged worker may need a long policy term and a high payout because if they pass away, there will be dependents left with nothing otherwise. A worker who has already retired and has very few dependents should need very little to no life insurance, there is no one relying on them.

Whole life insurance is similar to term life, but the policy is effective as long as you pay the premiums. A whole life policy has a determined face value, but there is also an investment component involved with it. Money you put into the policy past the premium costs will be invested and returns will be placed into a cash value account. Many companies have the option to allow this account to go against your premiums or to build in value.
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