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PRODUCT DESCRIPTION
1. The death benefit equals to 100% of the policy amount will be given to the beneficiaries when the
insured dies before reaching age 25.
2. Upon reaching age 18, the insured will receive 12% of the policy amount at the beginning of each
year until age 25.
3. Premium Paying Period (PPP) is either 5-pay or 10-pay subject to a maximum age eligibility of the
insured wherein payments can be made annually, semi-annually, quarterly or monthly through
auto debit, cash, bank payments or agents.
4. Product is designed for child with maximum age of 10 for PPP of 10 years and maximum age of 15
for PPP of 5 years.
ASSUMPTIONS
1. Mortality Rates
a. Reserve Mortality Rates are based on 1973-78 Philippine Intercompany Table. This table is
the same for both male and female and thus, age setback was done from age 18 wherein
𝑓
𝑞𝑥𝑚 = 𝑞𝑥+3 .
b. Pricing Mortality Rates are based on 1 over 1.25 of 1973-78 Philippine Intercompany Table.
2. Interest Rates
a. Interest rates used for pricing are based on Philippine Treasury Reference Rates - PM
(PDST-R2). 25-year tenor has been chosen as the product is up to 25 years and the average
of the rates from September 8 to September 30 is 4.71%
b. Interest rates used for reserve has been adjusted to a lower percentage which is 3.83%
3. Inflation
Inflation rate is based on the maximum percentage which is 2.50% in the Summary Inflation
Report Consumer Price Index for the year 2015 from Philippine Statistics Authority.
4. Commissions
Payment Period
Policy Year
5-pay 10-pay
1 10% 15%
2 5% 10%
3 5% 10%
4 3% 5%
5 3% 5%
6 3%
7 3%
8 3%
9 3%
10 3%
Payment Period
Policy Year
5-pay 10-pay
1 15% 20%
2 10% 15%
3 10% 15%
4 5% 10%
5 5% 10%
6 3% 5%
7 3% 5%
8 3% 5%
9 3% 5%
10 3% 5%
11 2% 3%
12 2% 3%
13 2% 3%
14 2% 3%
15 2% 3%
16 1% 2%
17 1% 2%
18 1% 2%
19 1% 2%
20 1% 2%
21 – 25 1% 1%
6. Expenses
Expense % of Premium
Acquisition 5.00%
Maintenance (Premium Paying Period) 2.00%
Maintenance (Paid Up Period) 0.00%
Premium Taxes 2.00%
Local Government Tax 0.50%
FORMULATIONS
The death benefit payable at the moment of death for this term life insurance given age of
insured, 𝑥, is calculated as
25−𝑥−1
1 𝑖
𝐷𝐵 ⋅ 𝐴𝑥:25−𝑥| = 𝐷𝐵 ⋅ ∑ 𝑣 𝑘+1 𝑘 𝑝𝑥 𝑞𝑥+𝑘
𝛿
𝑘=0
If the insured survives at age 18, insured will receive endowment benefit of 12% of the policy
amount payable at the beginning of each year until age 25 given that insured is alive. The annuity
is calculated as
0 , 𝑥 < 18
24−𝑥
18−𝑥| 𝑎̈ 𝑥:7| ={
∑ 𝑣 𝑘 𝑘 𝑝𝑥 , 18 ≤ 𝑥 < 25
𝑘=18−𝑥
3. Premium
1
𝑁𝑆𝑃 = 𝐷𝐵 (𝐴𝑥:25−𝑥| + 0.12 18−𝑥| 𝑎̈ 𝑥:7| ) .
𝑁𝑆𝑃
𝑁𝐿𝐵𝑃 =
𝑎̈ 𝑥:ℎ|
where ℎ is the payment term.
4. Terminal Reserve
Prospective approach is used to compute for the terminal reserve. The terminal reserve is
where
1
𝑡𝑉
(𝑡𝑒𝑟𝑚)
= {𝐴𝑥+𝑡:25−𝑥−𝑡| 𝑡 < 25 − 𝑥
0 𝑡 ≥ 25 − 𝑥
(𝑎𝑛𝑛𝑢𝑖𝑡𝑦)
𝑎̈ 𝑡<ℎ
𝑡𝑉 = { 𝑥+𝑡:ℎ−𝑡|
0 𝑡≥ℎ