I am doing the revision, and confusing about the face amount, net single premium and annual net premium. As I know the net single premium is the present value of the lump sum pay at time 0. How about the annual net premium and face amount?
For a fully continuous 20-year term life insurance on () with face amount 1,000, you are given:
- The net single premium is 150.
- The annual net premium is 15.15.
- =0.06.
Determine 20px
"Face amount" is the benefit; i.e., the amount the policy pays out in case the insured dies within the policy term.
"Net single premium" is the actuarial present value of the policy at the time of issue; i.e., the up front price of the policy at the time of issue that the insurer has calculated that equals the expected present value of the benefit, accounting for the future lifetime random variable of the insured.
"Annual net premium" is the amount of premium paid by the policyholder if payments are made annually at the beginning of each policy year until the insured dies or the term ends, whichever occurs sooner.
Now that these terms have been defined, you should make an attempt at solving the problem, and share your work with us.